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Telecom Announces Takeover Offer For AAPT

Telecom New Zealand ("Telecom") today said that its wholly owned subsidiary TCNZ Australia Investments Pty Limited ("TNZ Australia") intends to make a A$5.10 per share takeover offer for AAPT Limited ("AAPT"). The offer will be for all of the AAPT shares that TNZ Australia does not already own. However, Telecom's aim is to increase its shareholding while maintaining AAPT as a major listed Australian telecommunications carrier.

The offer price of A$5.10 per share values AAPT at approximately A$1.5 billion. The offer will be subject to a number of conditions as set out in the attachment. TNZ Australia currently owns approximately 19.8% of the shares of AAPT.

"Telecom's international strategies include growing our trans-Tasman business. AAPT provides Telecom with facilities-based participation in the fast-growing Australian market. Increasing our shareholding should enable both Telecom and AAPT to achieve key strategic goals sooner than if they were to proceed independently," Telecom Chief Executive Roderick Deane said.

All AAPT shareholders will have the opportunity to sell some or all of their shares under the offer. However, Dr Deane said that Telecom would prefer that AAPT remained listed on the Australian Stock Exchange.

"We would like to maintain a widely held register with institutional and smaller investors accounting for a substantial proportion of the shares on issue," he said.

"We fully expect that many shareholders will continue to hold their AAPT shares and benefit from the potentially significant synergies that are expected to emerge between Telecom and AAPT. This offer aims to provide an opportunity for those shareholders who would like to sell all or part of their shareholdings for their own personal liquidity or other reasons."

Dr Deane noted that: "The share price of AAPT was $4.85 on 30 August, prior to the run up of the last two weeks that appears to have been prompted by speculation about Telecom's intentions. The offer therefore represents a 5% premium to the underlying share price that prevailed before this speculation."

TNZ Australia first acquired AAPT shares in May 1999 and was welcomed by the AAPT Board. Since then the two companies have had numerous discussions which sought to resolve a basis for TNZ Australia to increase its shareholding percentage. Dr Deane said that the realisation of synergies between Telecom and AAPT improves with a higher level of equity interest.

"The relationship will enhance the global competitiveness of both parties and we anticipate a number of operational synergies," he said. Telecom expects the synergies might include: · joint management of Australia-New Zealand voice traffic, and more efficient use of international bandwidth; · potential to leverage off common systems and infrastructure, knowledge sharing and joint buying power; · enhanced service offering for Australia-New Zealand corporates and a broader offering for AAPT's corporate customers; · potential to jointly develop each company's Internet operations; and · potential for roaming on each company's proposed CDMA network.

"A relationship of this kind should enable Telecom and AAPT to achieve key strategic goals more rapidly and provides a framework to maximise benefits from the convergence of the New Zealand and Australian markets," Dr Deane concluded.

CONDITIONS OF OFFER · Approval by the Australian Treasurer under the Foreign Acquisitions and Takeovers Act or expiry of the notice period provided for under that Act without any objection having been notified prior to the close of the offer. ·

The Australian All Ordinaries Index not falling below a level of 2,830 points prior to the close of the offer. ·

The indicator rate for the Australian Government Ten Year Bond not exceeding 6.84% prior to the close of the offer. ·

The spot exchange rate of one New Zealand dollar being no less than Australian 77 cents prior to the close of the offer. ·

That during the period beginning on 15 September 1999 and ending at the end of the offer period, no change occurs in relation to the business, financial or trading position or condition, or the assets, liabilities or profitability, of AAPT or a subsidiary of AAPT which has or is likely to have a materially adverse effect on the financial position, profitability or prospects of AAPT and its subsidiaries taken as a whole, and no such change which occurred before 15 September 1999 but was not apparent from publicly available information before then becomes public. ·

That during the period beginning on 15 September 1999 and ending at the end of the offer period neither AAPT nor any subsidiary of AAPT:

a) conducts its business otherwise than in the ordinary course; or

b) acquires (as defined in the ASX Listing Rules) or disposes (as defined in the ASX Listing Rules) of any single asset, or collection of assets (if the assets are acquired or disposed of in what is in substance one transaction), where the book value or the value of the consideration exceeds $50 million; or

c) enters into any joint venture or partnership which requires it to dedicate to the joint venture or partnership any single asset or collection of assets having a book value exceeding $50 million or which commits it to expend an amount exceeding $20 million. ·

That during the period beginning on 15 September 1999 and ending at the end of the offer period, no person (other than TNZ Australia or any associate of TNZ Australia) who is a party to any contract with AAPT or any subsidiary of AAPT exercises, purports to exercise or states an intention to exercise a right or a claimed right under the contract to terminate the contract, or suspend or withhold the supply of goods or services under the contract, where such termination, suspension or withholding of supply has or is likely to have a materially adverse effect on the financial position, profitability or prospects of AAPT and its subsidiaries taken as a whole. ·

There being no "prescribed occurrences" as set out in Section 603 of the Corporations Law prior to the close of the offer.


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