Telecom weathers Cunliffe remarks and bounces back

Telecom shares rebounded yesterday with the market apparently not taking controversial statements made by Communications Minister David Cunliffe too seriously.

Shares closed up 5c at $4.44 after dropping 8c the previous day, when Cunliffe suggested greater competition and increased investment may require Telecom to cut its dividend.

"I don't think it's that big a deal," said a financial analyst, who asked not to be named. "The reality is, whatever happens to Telecom's dividend, is what he says going to influence it?"

The Government announced sweeping telecommunications reforms two weeks ago that will break Telecom's phone and internet monopoly by opening the company's network to competitors.

An announcement from the State Services Commission late on Tuesday absolving Telecom of any wrongdoing in the leaking of a Cabinet paper also helped the shares bounce back.

Cunliffe's comments earlier this week angered some figures in the investment industry, who said it was inappropriate for a politician to give his opinion on a company's dividend policy. But another financial analyst said the Government had previously signalled its desire for Telecom to cut its dividend.

"There's nothing new in what he [Cunliffe] said, he was simply reiterating what was already in the Cabinet papers."

Fallen favourite

Telecom shares have fallen $1.11 from $5.55 on May 3 to $4.44 - or about 20 per cent.

The company has lost more than $2 billion in market capitalisation since the Government's regulation announcement.

The average retail shareholder has 3900 shares and has lost $4329.