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Telecom's Reynolds to quit

By Susie Nordqvist

Telecom CEO Paul Reynolds's has announced he will leave the telco after it splits into two companies.
Photo / Dean Purcell.
Telecom CEO Paul Reynolds's has announced he will leave the telco after it splits into two companies. Photo / Dean Purcell.

Telecom's chief executive Paul Reynolds will leave the company in 2012, the telco confirmed today.

He will lead Telecom through the process of the demerger with Chorus in November, but the company said it would begin looking for a replacement Reynolds in 2012, with the view that a new chief executive would lead the company from the 2012/13 financial year.

Telecom proposed to split into two companies as part of its bid for Government broadband contracts, which it won the bulk of in May.

Under the deal, its network-arm Chorus must become a separate public company and will receive $929 million of Government funding to roll out a fibre network to much of the country.

Market commentators have labelled the split as one of New Zealand's biggest corporate shake-ups since the 1990s.

Reynolds, 54, who in the 2010 financial year earned a pay packet of more than $5 million, said he was excited by the challenge of leading the company through a new industry structure, but after five years in the role it was a good time to "hand over to a new CEO".

"Meantime, I'm determined to ensure that New Zealand, Telecom's customers, our people and our shareholders benefit from the demerger and UFB.

Reynolds said while he'd not yet made plans for his career post-Telecom, he wanted to maintain strong ties with New Zealand.

Asked whether any internal candidates, such as retail division head Alan Gourdie, may put their hand up for the role, Telecom spokesperson Mark Watts said that was an issue the board would consider in due course.

Telecom, the country's second biggest listed company, revealed a strong bill of health earlier this month, despite its profits plummeting by more than 50 per cent.

"We've grown the business, we've won the bulk of Government (ultra-fast broadband contracts) ... our customer satisfaction is up - so it feels like a very solid performance across the piece," Reynolds said.

Telecom's chairman Wayne Boyd also confirmed his intention to step down from his role assuming shareholders agreed to the demerger of Telecom.

Subject to the necessary approvals, the demerger is expected to be completed
by the end of November.

Meanwhile Telecom will issue a scheme booklet to shareholders with more information about the demerger, in September.

The phone company put forward the prospect of structural separation in a bid to shed the heavy regulatory burden of operating a copper-line network monopoly, and win tax-payer funding to build a nationwide fibre network.

That bid was successful, and Chorus won $929 million of the $1.35 billion on offer from the government to roll-out an ultra-fast broadband network. Chorus expects it will have to spend $470 million and $670 million of its own money over the next eight years on construction.

Once the split is complete, New Telecom will be the bigger of the two companies, with adjusted pro-forma earnings before interest, tax, depreciation and amortisation of $1.125 billion on $5.1 billion of sales in the 12 months ended June 30, while Chorus made $676 million on $1.1 billion of revenue.

New Telecom expects to stay listed in the NZX 50 Index, S&P/ASX 200 Index and the MSCI World (Standard) Index. Chorus will list in New Zealand and Australia. It expects to qualify for the NZX 50, but not the ASX 200.

News of Reynolds departure and details of how the split will work later this year have pushed Telecom shares down 4.36 per cent to $2.52 on the NZX this morning.

- with BusinessDesk

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