KEY POINTS:
The head of Telecom has urged shareholders to reject a bid by an American investor to get two new directors on the board at today's annual shareholder meeting.
Chairman Wayne Boyd, in his opening address this morning, acknowledged there were concerns - especially with respect to the share price.
But he said Telecom had the right people, strategy and leadership required to deliver.
Elliott International, a United States-based hedge-fund, has put forward its own nominations for two directors. It targets distressed financial situations, is calling Telecom the lowest valued integrated telecommunications company in the world.
Elliott owns 3 per cent of Telecom and is proposing Mark Tume and Mark Cross be added to Telecom's board as independent directors.
"Telecom's share price has been in decline over the past two years and its share price is around a 15-year low with profits expected to continue to fall over the next two years," a website set up by Elliott said.
The company's shares, which traded as high as $10 in 1999, were yesterday fetching $2.82.
Brokers said it is rare for shareholders to force a change in board make-up as companies typically hold large amounts of proxy votes from shareholders they can vote for their recommendation.
But Boyd said the board did not support the Elliott nominations.
"Elliott has also recommended the structural separation of Telecom as a way of enhancing shareholder value."
Boyd said Telecom had considered structural separation 18 months ago. However after extensive investigation, operational separation was considered the preferred separation model by the industry and the Government.
"We are now fully committed to operational separation in conjunction with our transformation programme, and believe it will deliver the best return for our shareholders."
Now was not the time to consider structural separation, he said.
He also said the current size of the seven member board was appropriate, as it "functions well and has sufficient diversity without being cumbersome".
"We do understand many of you are frustrated with the performance of the share price. We share your frustration. But we are confident that we have the right board, management team and strategies in place to turn Telecom around and deliver you shareholder value."
Core earnings had declined due to regulation and new competition on traditionally high retail market share and margins.
Boyd said New Zealand's sharemarket had been buffeted in recent months by forces that have affected much larger markets around the world, and this has also influenced our share price.
But he said Telecom remained well financed and in a strong position.
"We reiterate that, subject to any material change in circumstances, we intend to pay shareholders quarterly dividends of 6.0 cents per share, for the next two years, to provide a degree of certainty during this period of transformation.
"We are making good progress with the transformation of our business. We have already started to execute well and I have the utmost confidence that with your support we are well positioned to make the most of every opportunity in front of us."
Telecom's board is recommending that marketing guru Kevin Roberts be re-elected and also that Rod McGeoch be re-elected. It is recommending against resolutions to elect Cross and Tume.
Brokers expect Telecom to give an update on trading but as it reports quarterly and keeps investors well informed there are unlikely to be any big surprises.
- NZPA
