Telecom split approved - 99.8pc say yes

Outgoing Telecom CEO Paul Reynolds. Photo / Dean Purcell

Shareholders in Telecom have voted in favour of splitting off the company's network business.

Subject to final court orders, Telecom will separate its fixed line access infrastructure business, Chorus, to enable Chorus to take a leading role in the government's ultra-fast broadband (UFB) initiative.

Telecom said 99.8 per cent of votes cast by Telecom shareholders at today's annual meeting were in favour of the demerger proposal.

Fllowing the demerger, Chorus will be a stand-alone, separately listed company, allowing it to be the Government's partner for about 70 per cent of the broadband initiative.

The demerger will also enable the introduction of a new regulatory environment, along with the appointment of a new chairman and several new directors for Telecom, and a new board for Chorus.

Telecom Chairman Wayne Boyd will retire from the Telecom board upon demerger, along with independent directors Ron Spithill and Sue Sheldon. Sheldon will take up a new role as chairman of Chorus, Telecom said.

About 1.3 billion votes, or 66 per cent, were received, and the proposal needed 75 per cent to get over the line. Bond holders have already approved the deal.

"A massive year of change for Telecom culminates today," chief executive Paul Reynolds told shareholders at their annual meeting "We're more in charge of our own destiny than we have been for some time."

Telecom put forward the demerger proposal as a means to tap the government's $1.35 billion subsidy to roll out a nationwide broadband network, and its Chorus unit was successful in winning about 70 per cent of the contract.

Telecom's Chorus network unit will now become a standalone listed entity, at a benefit of some $500 million to shareholders based on the Crown subsidy, according to independent adviser Grant Samuel's report.

Reynolds said both companies will be well-placed in the new environment, with Chorus holding a near-monopoly of fixed line services, and new Telecom having strong market share in the retail space, as well as owning infrastructure such as the stake in the Southern Cross cable and the national backhaul network.

New Zealand Shareholders' Association chairman John Hawkins thanked Boyd for his contribution to Telecom's board, saying there had been a "sea-change in the attitude and focus of Telecom for the better."

Hawkins said he hoped the remuneration of executives and directors in the two new entities will be more closely aligned with the interests of shareholders and the performance of the companies.

Shares in Telecom fell 0.4 per cent to $2.55 in trading today, and have climbed almost 18 per cent this year.

Directors Murray Horn and Kevin Roberts put themselves up for re-election as part of Telecom's ordinary business.

WITH BUSINESSDESK