Joyce signs off on Telecom carve-up
By Paul McBeth
Aug. 30 (BusinessDesk) – Telecom Corp.’s proposed demerger is another step down the track after Communications Minister Steven Joyce signed off on the phone company’s proposal to split its assets.
Joyce said Telecom’s asset allocation plan met the government’s requirements, and will be monitored by the Commerce Commission to ensure all arrangements are on an arm’s length basis and won’t harm competition. The phone company plans to carve out its network Chorus unit into a separate company, freeing it up from regulatory costs associated with its operational separation and letting it tap $929 million of tax-payer funding to build a nationwide broadband network.
“In making my decision to approve Telecom’s plan, I consulted with the Telecommunications Commissioner who agreed that the asset allocation plan met the requirements of the Telecommunications Act,” Joyce said in a statement.
Telecom’s shareholders still have to vote on the deal which will leave the bulk of the fibre and copper assets under control of the new Chorus entity. The new retail company will end up owning the mobile network assets, service platforms for voice and data applications, international assets including AAPT, the stake in the Southern Cross cable and control of the national backhaul services.
The phone company hasn’t announced how it will distribute its debt between the two entities, and faces a likely cut to its long-term ‘A’ credit rating by Standard & Poor’s. The rating agency last week said the demerger will weaken Telecom’s “strong business profile.”
Telecom boosted annual underlying earnings 2% to $388 million as it stripped out $195 million of costs in the year ended June 30. Its bottom-line profit was hit by a $257 million impairment charge on assets associated with its copper network after the split meant it will no longer roll out certain products.
The shares rose 0.9% to $2.765 in trading yesterday, and have climbed 26% this year.