Telecom confirms company split

Last updated 16:12 02/08/2010

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Telecom has confirmed plans to split into two businesses in a bid to take part in the government's ultra fast broadband scheme.

The company said today it proposed to create a new company, "Chorus2'' as a separate standalone entity through a demerger - a process giving existing shareholders pro rata stakes in the new company.

The deal, foreshadowed by BusinessDay on May 20, would require 75 per cent shareholder approval.

Chief executive Paul Reynolds said Telecom had a critical role to play in the government's fibre vision.

"I firmly believe that Telecom, through Chorus, can deliver more fibre, faster and more efficiently than any other partner while avoiding duplication or waste. Our solution brings together the best of both worlds - the economies of scale and consistency of service inherent in a single, national, open access network, and the potential for significant local community involvement,'' he said.

"It was essential that our proposal aligned the interests and incentives of Telecom, its shareholders, the Government and New Zealanders, and I believe we have delivered that.''

Telecom's plans are designed to ensure it can be involved in a government scheme to subsidise construction of a fibre optic network connecting 75 per cent of homes and businesses by 2019.

Crown Fibre Holdings, the state-owned company controlling the scheme, invited bids from industry participants, whose proposals were due by Saturday.

A Crown Fibre spokesman told BusinessDay it would develop a shortlist from those bids and "we expect to make recommendations on preferred investment partners to shareholding ministers in October 2010.''

Further details of the demerger, such as which assets will be transferred to Chorus2 and how much debt the company will carry, were not revealed. A Telecom spokesman said bids were strictly confidential.

Telecom's announcement follows the sale of part of its Australian business AAPT last week, rounding out the predictions of a market source in May's  the Independent.

"The split's coming," he said. "And before that, what's coming is the sale of AAPT. [The AAPT deal is] getting down to the business end and shortly after that you will see Telecom ask for government approval to split the business.''

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