Telecom shareholders could be in line for a payout if Telecom successfully quits its business in Australia, some analysts believe.
Telecom yesterday confirmed that it was considering selling Australian subsidiary AAPT but has not commented on what it described as a "rumour" that it might also sell its 5 per cent stake in Australian mobile network operator Hutchison, which is held through a joint venture.
Telecom spokesman Richard Llewellyn said talk of a capital return was "getting a bit ahead of ourselves".
Analysts estimate AAPT could fetch about $300m. Telecom's stake in Hutchison is valued on the company's books at $77m, but a recent spike in Hutchison's share price means its current market value should be about $150m.
Telecom could therefore net about $450m from quitting the Australian telecommunications market completely.
First NZ Capital analyst Greg Main said Telecom was already relatively undergeared, which raised the prospect of some form of capital return if either or both sales went ahead.
"It ended its financial year with a ratio of net-debt-to-Ebitda of about 0.82. If it sold AAPT that would probably drop down to 0.85, which is low internationally, so you would expect some form of capital management initiative."
First NZ Capital values AAPT at $300m. But Main said it could be hard to put a price on the subsidiary while considerable uncertainty still hung over the future of Australia's National Broadband Network (NBN) following Australia's change of government in September. The NBN is the equivalent of New Zealand's Ultrafast Broadband Initiative. Telecom's investment in Hutchison was "dead money", he said.
Forsyth Barr analyst Blair Galpin thought a capital return possible but less likely. Telecom would probably want to hang on to a "good chunk" of any sale proceeds given the investments it would need to make in 4G technology and shared services, he said.
It values AAPT at about A$250m and Galpin said he was unsure if its sale, alone, would justify a special payout.
AAPT is understood to have been on the block before and no sale is guaranteed. Telecom chief executive Simon Moutter told analysts in May that its strategy in Australia would be up for consideration this financial year. Telecom said in its annual report in August that it expected to have "a clear strategic pathway" for the business by the end of its financial year in June.
AAPT's earnings before interest, tax, depreciation and amortisation (Ebitda) fell 15 per cent to A$57m this year. Its assets include more than 11,000 kilometres of fibre-optic cable and data centres in the major Australian state capitals.
Telecom shares closed down half-a-cent at $2.275.
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