Market expected to stay cautious until deal sealed

Photo / Greg Bowker

The market's response to the naming of Telecom as the prioritised bidder in the Government's ultra-fast broadband scheme will remain muted while uncertainty surrounds the deal, analysts said.

Crown Fibre Holdings announced yesterday that Telecom was first in line to negotiate a partnership with the Crown to provide the fibre network for 25 regions around the country, including Auckland and Wellington.

Following yesterday's announcement, Telecom shares opened at $2.14, up 6c or 2.8 per cent from the end of trading last week, and closed up 2c at $2.10.

Tristan Joll at Goldman Sachs said the shares were unlikely to rise much, given that no deal had been finalised.

"[Yesterday's announcement] was just a development in a very lengthy process with a lot of uncertainty."

While negotiations were moving forward, he warned against jumping to conclusions over whether Telecom would secure a deal with Crown Fibre.

Rosalie Nelson at IDC New Zealand agreed and said while Telecom has made gains, it would be wrong to assume the agreement was set in stone.

As well as settling the prices and the costs of laying fibre, Telecom faces legal and regulatory hurdles making its network division, Chorus, a separate entity to manage the fibre network.

Even if Telecom was successful in its bid, the impact on the value of shares would not be clear until the financial details of the agreement were released.

First NZ Capital's Greg Main said among the unknowns were any deals the successful bidder could make with other providers to reduce the costs of laying the fibre network.

Vector shares took a hit, falling 6c to close at $2.35 as the company failed to secure negotiating rights with Crown Fibre holdings.

Main said Vector remained a contender for the Auckland network and its shares could bounce back.

"They could still win Auckland and they could still do a deal with Telecom to help cover Auckland."