Telecom to slash value of AAPT by about half

Telecom will slash by half the book value of Australian subsidiary AAPT, just as it decides whether to sell the struggling unit.

The company said it would reduce the book value to between A$600 million ($659 million) and A$700 million from the present book value of A$1.4 billion at its next earnings report early next month.

The announcement was made just 15 minutes before the NZX closed and, in that time, shares in New Zealand's largest listed company fell 13c to $5.74.

The cut will bring AAPT's value more into line with where the market sees it, though some analysts have it valued even lower.

Telecom blamed the reduction in AAPT's value on "a significant tightening" in wholesale terms and prices with Telstra and "continued downward pressure" on retail prices.

At the end of the month, Telecom will begin a "strategic review" of its options for AAPT, which include selling it or a joint venture with another carrier.
"A number of parties have already confirmed their interest in participating in the process," Telecom said yesterday, after confirming the review would start on time.

Australian telco Optus has reportedly offered $600 million for AAPT, but Telecom has declined to confirm whether the offer was made.

Forsyth Barr analyst Jeremy Simpson said the writedown was unlikely to affect the sale. "The buyer is going to pay what he thinks the business is worth," he said.

Telecom bought AAPT in 1999 for $2.2 billion, then wrote down its value to $1.5 billion in 2002.