Telecom sells AAPT to Aussie telco
Telecom has got a pretty good price for its Australian business unit, AAPT, all things considered, analysts say.
The company announced this morning it had finally sold the unloved subsidiary for A$450 million (NZ$496m), with strongly performing listed Australian firm TPG Telecom the buyer.
The sale largely brings to an end Telecom's disastrous foray into the Australian market, although it still holds a 5 per cent stake in Australian mobile network operator Vodafone Hutchison Australia through a joint venture. The stake in Hutchison is worth $77m on Telecom's books but has a market value of about $140m.
Telecom confirmed AAPT was on the block in October, but there have been rumours for many years it was keen to sell if it could obtain an adequate price. Investors welcomed the unconditional sale agreement, pushing Telecom shares up 2 per cent to $2.33 by lunchtime.
First NZ Capital analyst Greg Main said the sale price was good. He expected Telecom would return some of the proceeds to shareholders, but warned that might depend on whether it acquired the final block of "digital dividend" radio spectrum, bidding for which is believed to have now reached about $50m.
"If they do keep too much of it, investors will get nervous they might blow it on a content play or pursuing growth."
It would be logical for Telecom to also sell its stake in Hutchison which was "dead capital", he said.
Forsyth Barr analyst Blair Galpin agreed the price TPG Telecom paid for AAPT was higher than expected, noting there had been speculation in October that AAPT would most likely fetch between A$300m and A$400m.
"It has been on the blocks for a while. A$450m is more than we thought the business, as a long-term proposition for Telecom, was worth."
Galpin said Telecom might hold on to the proceeds for some time and weigh up its options towards the end of the financial year.
Telecom said the sale proceeds would be used to repay debt.
Overall, AAPT had proved a black hole for Telecom.
Telecom acquired the company in stages between 1999 and 2000 for about $2 billion, and pumped billions more into the company in the following years, but the investment quickly became a loser.
Writedowns of AAPT by Telecom totalled more than $2b.
In 2010, Telecom sold the consumer division of AAPT to ASX-listed iiNet for A$60m.
Telecom chief executive Simon Moutter said the sale of the remainder of AAPT was "consistent with our desire to focus principally on our New Zealand operations and on the needs of New Zealand customers".