14 Sep 2011

Telecom split deemed in best interests of shareholders

7:41 am on 14 September 2011

An independent report says Telecom shareholders will be $500 million better off if they accept the company's plan to separate into two listed companies.

The company must separate its network arm, Chorus, into a standalone company in order to participate in the Government's $1.5 billion ultra-fast broadband initiative, and needs shareholder approval to do this.

Should investors approve the split, Mark Verbiest, who currently chairs Transpower and was previously Telecom's general counsel, will succeed Wayne Boyd as Telecom chairman.

Telecom on Tuesday published all the details of its proposed split.

The report, by Grant Samuel, compared the estimated value of both separation and of Telecom remaining as one company and therefore not taking part in the broadband build.

It states the split will leave shareholders better off by $500 million, equivalent to 28 cents per share, mainly because the Crown's investment is like a subsidy for Telecom and the company would not have to compete with a second high-speed network.

The report says remaining as one company would be a destructive outcome for both the Crown, and Telecom shareholders, because two competing fixed line networks would be chasing a small market.

The Grant Samuel report says it is too difficult to predict with confidence the share prices of the split companies, New Chorus and New Telecom.

Shareholders will be asked to vote on the deal on 25 October.

Shares in the company rose 5 cents to $2.155 on Tuesday.