KEY POINTS:
Telecom will remain takeover-proof even if it carries out its proposal to hive off its phone network into a separate company.
The company is currently protected against takeover by a limitation on shareholding put in place by the government when the phone company was sold in 1990.
Under Telecom's constitution, a person acquiring 10 per cent or more of the company's shares requires the consent of the board and the Kiwi Shareholder - the Minister of Finance on behalf of the Crown.
The constitution also precludes any non-New Zealander buying 49.9 per cent or more of Telecom shares without the Kiwi Shareholder's consent.
Telecom is being forced by the Government to separate into three operating units - retail, wholesale and network - to give competitors equal access to its network and services.
But Telecom advocates a two-way split which would see the retail and wholesale units operating separately under the Telecom banner, and the network assets held in a separate company. Telecom has confirmed that under its proposed structure, the shareholding cap will apply to retail and wholesale business remaining under the company's control.
"No shares in Telecom Corp are proposed to change hands under our proposal. If Netco is carved off this means either we are selling assets or a subsidiary we will have formed, not shares in Telecom," said Telecom spokesman Phil Love.
The Kiwi Share is an agreement introduced before Telecom's 1990 privatisation to retain affordable access to residential phone services by rural and urban customers alike.
Minister of Communications David Cunliffe announced in January a review of the Kiwi Share to ensure it takes account of new technologies.
Australian media have speculated about a tilt at the telecommunications sector by private equity. Names mentioned included Telstra, parts of Telecom and Australian junior telco Commander Communications. Telecom shares closed at $4.86 on Friday.
Kiwi share
* Ownership of 10 per cent or more of Telecom's shares requires the consent of the board and the Kiwi Shareholder - the Minister of Finance on behalf of the Crown.
* Non-New Zealand nationals cannot buy 49.9 per cent or more of Telecom shares without the Kiwi Shareholder's consent.
* Free local calling for residential customers.
* Price increases for residential line rental remain in line with inflation.
* Requires rural and urban customers to be charged the same amount for standard residential phone services.
