Telecom poised to sell part of Aussie arm

Telecom is expected to take a different tack by splitting AAPT. Photo / Supplied

Telecom New Zealand is said to be close to a deal with Australian telco iiNet to buy the retail arm of its Australian business, AAPT.

Media reports out of Australia had suggested Telecom was a step closer to quitting its billion-dollar investment in Australia, but had been unable to find a buyer for the whole business.

Yesterday, ASX-listed iiNet requested a two-day trading halt "pending the announcement of a potential acquisition".

iiNet said it envisaged making an announcement to the ASX concerning the proposed transaction before the market opens on Monday.

In a statement to the market, Telecom said it would consider offers for the AAPT business that were in the best interests of shareholders. Shares closed up 3c at $1.99.

"Telecom is currently considering strategic options in respect of these assets."

It said part of this review was the sale of its 10 per cent stake in Australian telco Macquarie Telecom for A$9.9 million ($12.2 million), a legacy of its 2007 purchase of network operator Powertel.

Goldman Sachs JBWere analyst Tristan Joll said the notice from Telecom stated more explicitly than it had in the past that it was considering options around AAPT.

"Clearly you look at Australia and you say it's not an integrated part of their core domestic business plus it's had its fair share of headaches over the years," said Joll.

A Telecom representative would not comment on the iiNet talk.

A report in the Australian said iiNet was believed to have submitted a proposal that could see AAPT's retail and wholesale arms sold as separate entities.

Sources close to the sale have told the Australian iiNet is positioning itself to snare AAPT's consumer business after a bid from the acquisitive TPG Telecom for AAPT's entire operations failed to pass muster at the final hurdle.

Telecom was understood to be seeking book value - estimated to be around $500 million - for the whole business.

While Telecom had originally been hoping to sell the telco in a single deal, it is now moving towards splitting the business, with a view to holding its wholesale fibre division for a possible sell-off into Australia's Government-backed National Broadband Network, according to the Australian.

Craigs Investment Partners analyst Geoff Zame said Telecom would clearly prefer to make a clean exit and sell the business in its entirety.

"But if that option wasn't available, and it looks like there was a lack of bid tension and interest in the end with certain players withdrawing from the process, they're forced to consider any bids for any parts of the company."