KEY POINTS:
Telecom has defended the launch timing for an expanded mobile phone network and profit downgrade, saying the board was still signing the $391 million expansion plan 90 minutes before telling the market.
Local sharemarket analysts have supported the Telecom move, which increases its capital expansion programme from $2
billion to $2.4 billion.
But with the share value fallen 45 per cent in the past year Elliott International - a rebel shareholder and critic of the company's expansionary programme - has stepped up questioning the way the company is run.
Elliott owns three per cent of Telecom and openly criticised the board in a letter yesterday. It questioned the launch timing and a lack of details about how the extra investment will boost revenue
"Why did the board choose to announce these figures this week instead of at the AGM, just 13 days earlier, when shareholders were in attendance?
"What has happened to change the company's position so radically in the past two weeks. Arguably, this restricted shareholders from seeing the full picture when casting their votes!"
Telecom spokesman Mark Watts said the decision for a full 3G network - adding $391 million to the capital programme over two years - was made on the morning of the announcement. Asked if the details must have been advanced to book a launch at the Sky Tower and a promotion at nearby Victoria Park, he said that the company had to plan ahead.
Watts said the company was limited by disclosure rules and once the decision was made, had no choice but to notify the market.
Analysts said this week the push for a full 3G system was expected and a case of Telecom "biting the bullet".
But Elliott - a US hedge fund that would likely benefit from a full split of the company and sale of the retail arm - described Wednesday's launch as "a surprise announcement".
In spite of the public criticism, bargain hunters were believed to be responsible for helping lift Telecom shares nearly 5 per cent, or 11c to $2.34, after a dismal week for the stock when it hit 16-year lows.
"How many more guidance downgrades should shareholders expect? When will the number be credible?" Elliott asked.
"What is the Board planning to do about its falling profits?
"Or does it simply intend to sit back and hope for the best?"
Elliott signalled that it intends to be a thorn in the side of Telecom chairman Wayne Boyd and chief executive Paul Reynolds.
"In light of its October 15 announcement does Telecom still believe it has the right board, management team and strategy in place to turn around the Company and deliver shareholder value?"
Boyd's response suggested irritation with Elliott's activism and said many of Elliott's questions had been answered in post-launch briefing.
"We believe this decision will provide Telecom with a renewed competitive advantage and while Telecom expects vigorous debate about its performance and welcomes it - it has a job to," he said.
ANNOUNCEMENT COUNTDOWN
August 8: Telecom says it may accelerate its new WCDMA broadband mobile to a full 3G service.
August 11: Rebel shareholder Elliott International nominates two directors to the board.
October 2: At the Telecom AGM no new details are released on the impact of the planned mobile network expansion. Rebel nominees are beaten by those backing board plans.
October 15: 8.15 am. Telecom board approves a major expansion of its network that adds $391 million to its two-year capital programme.
October 15: 10am. Media and analysts are told 2009 profits will fall by 5 per cent to 8 per cent - down from previous guidance of 4 per cent to 6 per cent.
Yesterday: Elliott asks why the new network was not revealed in time for the AGM and the director vote.