Telecom edges towards control

By Richard Braddell

WELLINGTON - Telecom is expected to end up with a stake slightly less than half of Australia's third largest carrier, AAPT, after yesterday securing its position as the company's largest shareholder.

In a swoop on 28 million shares, Telecom took its holding to about 19.5 per cent, just short of the 20 per cent threshold at which it would have to make a formal offer for all or part of the outstanding shareholding.

The holding, worth $A140 million, was bought at $A5 a share, the same price rival Cable & Wireless Optus paid in April for a 10.6 per cent stake, but less than the $A5.70 share Telecom paid in its surprise raid on 9.9 per cent three weeks ago.

The next step is likely to involve an offer for the 17.6 per cent stake held by founding shareholder AAP Information Services, which is known to be contemplating its exit.

But to buy the stake without making a full bid, Telecom will have to gain the approval of the other shareholders, some of whom may only be placated by being bought out themselves.

Some Australian institutions have reacted badly to a sharp fall in AAPT's share price to below $A4.80 after Australia's competition regulator, the ACCC, put paid to a bidding war when it blocked C&W Optus' full bid.

Nevertheless, Telecom is understood to be hoping enough of the dissident institutions were mopped up in yesterday's swoop for it not to have to go over 50 per cent, the point at which it would have to consolidate AAPT rather than equity account it.

AAPT chief executive Larry Williams said last night that Telecom was likely to be offered a board seat.

With the AAPIS stake, Telecom would hold 37 per cent.

But Mr Williams said the AAPT board would discuss the possibility of Telecom having a controlling stake without making a full takeover bid.

"I am afraid a lot of our shareholders may not like that," he told Reuters. "Forty to 50 per cent is in control basically and not getting some sort of premium for every shareholder would be of concern."

After C &W Optus' 10.6 per cent, shareholdings are fragmented and many will see an AAPT with Telecom and C&W Optus behind it as a good play for medium-term growth.