Telecom considers AAPT bids

Telecom has received indicative bids for its troubled Australian business, AAPT, amid market speculation that New Zealand's biggest listed company may itself be a takeover target.

A report in The Australian said bids for AAPT closed last Friday, after Telecom chief financial officer Marko Bogoievski visited Australia last week to hear final pitches from interested buyers.

The paper said possible buyers included Singapore Telecom's Optus, regional telco Soul, and a consortium of listed telcos Powertel and Commander with the backing of Powertel's parent, Hong Kong private equity group TVG.

It quoted sources as saying the TVG consortium was emerging as a strong consolidation play with a cash and shares bid that would probably see Telecom left with a stake in a locally listed merged group.

Telecom has previously said it would like to maintain an equity holding to protect its trans-Tasman business customers.

Telecom is expected to make an announcement on AAPT's future at its third quarter result briefing on May 5.

In January, Telecom split its Australian business in two -- mass market and managed services (business customers) -- in January after writing down its value from A$1.4 billion ($1.67 billion) to A$600 million.

The Australian said Telecom was expected to make a similar restructure of its New Zealand business, the first internal move in four years.

Meanwhile, Telecom was itself the subject of takeover speculation yesterday.

Sydney-based Credit Suisse analysts Justin Cameron and Mark Storey suggested that Telecom was a logical candidate for a leveraged buyout at its current share price.

"With strong cashflow and a balance sheet underleveraged, we view the potential of a leveraged buyout of Telecom as increasingly likely," the pair said in a report.

In leveraged buyouts, a firm puts up a little of their own money and borrows the rest, piling debt onto the company being acquired.

Telecom declined to comment, with spokesman Phil Love saying it was company policy not to remark on analyst reports.

Local analysts shot down the speculation, however.

Wayne Stechman, equities manager at Tower New Zealand, said such a buyout was "legally and technically impossible".

The former state-owned telco was privatised in 1990 but the legacy of that -- an agreement with the Government known as kiwi share -- required that crown approval must be sought for any interest in the company over 10 per cent.

In addition, no foreign shareholder could own over 49.9 per cent.

The Government was unlikely to come to the party on such a deal.

Telecom shares have fallen by 20 per cent in the past four months, mainly on fresh fears that the Government will introduce more regulations.

- NZPA