Buyers circling Telecom sell-off

SYDNEY - Telecom is considering "a number" of formal proposals for its underperforming Australian business, most from potential trade buyers.

"The proposals are all quite different. There are proposals that range all the way from an outright sale through to merger proposals," said Marko Bogoievski, Telecom's chief financial officer.

"The more interesting proposals in there are from strategic players in the market who are looking to strengthen their own business models," he said, while declining to identify the bidders by name. He said a decision was expected by May 5.

Singapore Telecommunications, which owns Australia's second-biggest phone company, Optus, has said it would look at the business.

Media reports claim that regional telco Soul, and a consortium of listed telcos Powertel and Commander Communications with the backing of Powertel's parent, Hong Kong private equity group TVG are also bidders.

In February, Telecom more than halved the book value of its Australian operation, which includes third-ranked AAPT, to A$628 million ($737 million), citing falling retail prices and rising wholesale charges. The unit made up about a quarter of group revenues last year.

Telecom, which is being advised by Citigroup, would prefer to retain all or part of the unit rather than sell it outright.

Asked about a report by Credit Suisse earlier this month that said Telecom was a logical candidate for a leveraged buyout at a 25 per cent premium to its current share price, Bogoievski said such a deal would be almost impossible to execute.

"We have not been approached and definitely no transaction like that is imminent," he said. "Because of regulatory and political factors in New Zealand, a deal like that would be extremely difficult to execute."

Following Softbank's $15.5 billion purchase of Vodafone Group's Japan business and amid speculation on buyouts of European phone companies, Credit Suisse said a leveraged buyout of Telecom could be justified at $6.50-$6.75 a share.

The Credit Suisse analysts see the potential new owner selling AAPT for A$432 million and its Southern Cross Cable for $850 million.

Telecom Corp shares closed down 1.21 per cent on Thursday at $5.70, giving it a market value of $11 billion.

- REUTERS