Telstra 'separationists' gain an unlikely ally UPDATED

by Stuart Corner

Monday, 11 August 2008

Page 1 of 2 ! Those advocating for the structural separation of Telstra have gained an unlikely advocate for such a strategy: a $10B US hedge fund and Telecom NZ shareholder that is pushing aggressively for Telecom NZ to be structurally, rather than simply operationally, separated. (This article has been updated to include Telecom NZ's response to the move) The shareholder, Elliott International, which holds about three percent of Telecom NZ equity, has been pushing Telecom to consider structural separation for more than a year, describing it as "a simple structural split of Telecom's retail business (NewCo) from the remaining wholesale and network business of Telecom (NetCo), but has now stepped up its campaign with a move to have new independent directors of its own choosing elected to the board. If first proposed the idea in November 2007 in a submission to the Government on Telecom's operational separation plan. and claims since then to have provided Telecom's management and the board with extensive research and analysis on the structural separation proposal, including reports from global consultancies on key feasibility issues - regulatory and legislative implications, cost, and technical issues. It claims that this research "outlines the significant benefits the proposal could bring for Telecom, its shareholders and customers." In contrast, one of Telstra' main arguments against structural separation is that it would destroy shareholder value. Elliott has put forward Mark Tume, from Wellington, and Mark Cross, from Auckland, for election at the forthcoming AGM on 2 October with James Smith, a portfolio manager at the fund, saying: "For almost a year we have been trying to talk to Telecom about some of our ideas and concerns regarding the affairs of the company. Telecom's share price has been in decline over the past few years and once again, following disappointing year end results, its share price is around a fifteen year low. "In our view, Telecom's performance languishes behind that of other key telecommunications players in the international market, and we believe this is partly due to an unclear and outdated strategy. Shareholders and customers remain dissatisfied with Telecom's progress." According to Elliott, "Telecom needs to take immediate and serious action to improve its situation and to consider and debate new ideas that will benefit customers and shareholders." Telecom NZ has dismissed Elliott's initiative. Chairman, Wayne Boyd, said the company had met with Elliott on several occasions over the last twelve months to discuss its views on Telecom's strategic direction, including the implications of structural separation. "Telecom has carefully considered the implications of structural separation, and does not believe that separating our retail and network businesses would be in the best interest of shareholders at this time. The board of Telecom continues to be fully committed to considering all available options to enhance shareholder value and we believe we have the management team, strategy and financial expertise to maximise long-term shareholder value." CONTINUED << First page <   1 2 Next page > Last page - Post your comment >>

 

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