AAPT says Telecom offer less than fair

Telecom's bid for Australian telecommunications firm AAPT was neither insulting nor hostile, just inadequate, AAPT's chairman Lee Casey said yesterday.

Mr Casey told a Sydney news conference that AAPT's board had recommended that shareholders reject Telecom's offer of $A5.10 a share.

For its part, Telecom, which already owns 19.8 per cent of AAPT, confirmed that it was targeting 40 to 50 per cent of the company, even though it has launched a full takeover bid.

Mr Casey said the offer price ignored AAPT's strategic position in the Australian telecommunications market and its substantial growth potential.

He said Grant Samuel had been appointed to update its independent valuation of Australia's third-ranked telecoms company, expected to be completed in two weeks.

Shortly after AAPT's statement, Telecom NZ chief executive Roderick Deane said in a statement: "We believe the offer is attractive and fairly priced.

"Equally, we appreciate and agree with the view of the board of AAPT that many AAPT shareholders will want to remain in AAPT and share in the additional value we believe will flow from a closer relationship and realisation of synergies between the two organisations."

In May, while Australian rival Cable & Wireless Optus was mounting its $5 a share hostile takeover bid, Grant Samuel valued AAPT at between $6.04 and $7.01 a share.

Mr Casey differentiated the Optus bid from that mounted at present by Telecom.

He said Optus, which remains sitting on a 10.6 per cent share of AAPT, never advised AAPT of its intentions and, if the bid had been successful, AAPT would have been merged, with the loss of numerous jobs.

On the other hand, Telecom had been far more forthcoming - "we are not at war with Telecom NZ".

Asked by journalists if the Telecom offer was insulting or hostile, Mr Casey said no on both counts.

He said AAPT saw Telecom as a good strategic partner.

"It's purely that we feel that, if they wish to raise their shareholding, they have to pay a fair price to do it and come up with something that's in the best interest of all shareholders."

If Telecom did get control, he said, he would like to stay on as chairman.

The decision to pursue AAPT marks a major turn-around for Telecom's board, which last August rejected a recommendation to take 20 per cent of the company, because at that stage it was then too reliant on the long distance market.

But with AAPT now worth twice as much, Telecom is prepared to boost its position because it is a dramatically different business, said Telecom's chief financial officer, and a rumoured contender for the top job at AAPT, Jeff White.

While Telecom wanted less than 50 per cent of AAPT, said Mr White, it had the financial capacity to take the lot using a $1.6 billion debt facility that was recently put in place to fund the bid, its share of the Southern Cross cable project and its $200 million CDMA network.

However, he agreed that acquiring AAPT would be "earnings dilutive" after taking account of the interest and goodwill impact for at least three years, after which time it is expected to make a positive contribution to Telecom's earnings per share. - NZPA & HERALD STAFF