Telecom demerger formally on the table

Telecom has officially put itself on the carving block in its latest bid to tap government funds to roll-out high speed internet through the nation.

The bid relies on the structural separation of Telecom into two units that would carve network business Chorus out as a standalone company.

The de-merger proposal will need at least 75 per cent of shareholders to give it the nod of approval.

"This would be a significant event for our company and would radically transform the telecommunications sector in New Zealand," chief executive Paul Reynolds said.

"No sacred cows have been spared and no assumptions have been left unchecked as we have worked through this stage of what is a challenging but critically important issue," Reynolds said.

"We have also proposed integrating the Ultra-fast Broadband initiative with the Rural Broadband Initiative. Integrating the two initiatives would allow for the extension of the reach of Ultra-fast Broadband into rural areas well beyond the 75 per cent coverage area."

Reynolds hinted at a demerger on the company's investor day in May, saying that was one way Telecom could participate in the government's $1.35 billion plan without diluting shareholders' value.

For that to go ahead, the phone company would need significant relief from the regulation of its high-speed copper services. The shares climbed 1.5 per cent to $2.02 in trading today.

The details of the refined plan for the Government's ultrafast broadband initiative to Crown Fibre Holdings are confidential.

The proposal was aligned with the interests of Telecom's shareholders, the Government and New Zealanders.

- NZPA and BusinessDesk