AAPT sale gets thumbs up for Telecom

Photo / Dean Purcell.

Telecom has got a good price for its Australian business unit AAPT, say analysts.

The NZX-listed telco this morning announced the sale of AAPT for A$450 million to Aussie telco TPG. This follows Telecom's earlier sale of the AAPT consumer division to iiNet for A$60 million ($75 million).

The remaining chunk of the business being sold to TPG provides data, cloud, voice, internet and mobile services to business, government and wholesale clients.

In Telecom's latest financial results for the 12 months to June 30, AAPT recorded earnings before interest, tax, depreciation and amortisation of $74 million, down from $88 million the year before. As at June this year AAPT employed 720 full-time employees, out of a total of 6622 at Telecom.

Telecom spent A$2.2 billion buying AAPT at the height of the dot.com boom in 1999 and 2000 but it has been seen as a poor performer for the company.

Forsyth Barr senior equity analyst Blair Galpin said Telecom had been trying to sell AAPT for about four or five years and that he believed today's deal was a good one.

"There was talk probably about five or six weeks ago of a price around A$400 million. At that point we thought [that] was a good price so A$450 million is even better. AAPT, even though it's sort of turned around a bit in the last year or so, has been a bit of a drag on Telecom long term...it allows the company to really focus on New Zealand and get New Zealand in shape," Galpin said.

Telecom chief executive Simon Moutter said today the sale was consistent with the company's strategy and its desire to focus on New Zealand and the needs of local customers.

Craigs Investment Partners research analyst Arie Dekker said the sale was "a very good result".

"[The sale price] also likely reflects the fact they've been able to secure a purchaser who sees synergies for the business, bringing that business together with their own" he said.

With the exception of its half-share of the Southern Cross cable, AAPT was the last big overseas assets owned by the company.

See Moutter interviewed recently in our Meet the CEOs video series:

Telecom says money from the AAPT sale will, first and foremost, go to repaying debt. Telecom said it will provide further detail on how the sale proceeds will be used at its half year result next February.

The sale with go through on February 28.

In late morning trading Telecom shares were at $2.33, up 1.97 per cent.