Telecom price slip gives rise to hints of raid

WELLINGTON - Telecom shares fell to a 32-month low of 715c yesterday and analysts said it was not off the wall that New Zealand's largest company become subject of a takeover raid.

"It's been talked about. I wouldn't discount it if the share price was to carry on like this," said Deutsche Securities analyst Kevin Bennett.

"There are practical difficulties but they are not insurmountable."

Telecom shares ended the session 6c lower at 725c. The shares have fallen 27 per cent from April 10 when they hit 981c.

A direct takeover of Telecom would be difficult because the Kiwi share gives the Government the right of veto over a foreign company wanting to acquire more than 10 per cent.

As well, Bell Atlantic technically still holds a 25 per cent stake and that would make any takeover messy. Other than Bell Atlantic, which announced in 1997 it was quitting Telecom's register and raised convertible notes based on its share, Telecom does not have a major shareholder.

But Telecom is in the process of reinventing itself to get more value recognition from its growth divisions - mobile, AAPT, data, and Xtra.

That could involve spinning off a separate company or companies in which a global or regional player could take a stake.

Last week, the Australian Financial Review suggested Telecom had been asked to bid for C&W Optus' mobile business, valued at $A15 billion ($19.5 billion). The report was denied by C&W, but such a huge undertaking would probably require setting up a separate company with Telecom's and AAPT's mobile businesses.

The two obvious contenders to buy into a regional business would be Singapore Telecommunications, which has regional aspirations to set up an Asian mobile network with Deutsche Telekom, and NTT DoCoMo, Japan's internet-savvy mobile giant, which last week announced it had decided to play with the big boys.

- NZPA