Telecom wins waiver on options

Theresa Gattung's options will remain worthless

The New Zealand Exchange will allow Telecom to issue options to its top executives and staff at below the level the exchange usually allows under its listing rules.

Under NZX guidelines, when companies issue share options to staff, the price at which the options can be exercised has to be at least 90 per cent of the average market price of shares for the month preceding the options issue.

But the NZX granted Telecom a waiver to issue options to its top 100 staff in future with a discount greater than the 10 per cent usually allowed.

The options on issue to Telecom's top four executives which have been rendered worthless by sharp falls in Telecom's share price this year are unaffected by the scheme and will remain worthless.

Shares options often form part of top executives' salary packages and give the holder the right to buy shares at a future date at a pre-agreed price.

The waiver will apply to any future issue of options by Telecom. Company secretary Linda Cox said Telecom could potentially issue more options in September but that was a decision yet to be made by the board.

Chief executive Theresa Gattung, chief financial officer Marko Bogioevski, chief operating officer Simon Moutter and chief IT services officer Mark Ratcliffe are all covered by the present share option scheme.

Telecom said in the past it had always had flexibility over the price at which it issued its options, but new listing rules had required it to seek the waiver.

"It is business as usual, there has been no change in the way we price options, restricted shares or share rights," said Cox.

Craig Brown, fund manager for Principal Walker Capital Management, said it was important the options were "realistically priced".

"As long as the options are not unnecessarily lower, that's fine.

"They have got to be realistically priced otherwise it doesn't incentivise its staff and the return to shareholders is a lot more meaningless."

The NZX said it granted the waiver because offering discount shares to employees "is a common and generally accepted means of remunerating employees and providing incentivisation perceived to align the interests of employees and shareholders.

"In addition, the directors of the company will be accountable to the security holders for the degree of the discount."

Under the waiver, Telecom will be forced to provide the NZX with a statement of the discount of all securities issued over the past 12 months.

Telecom shares have been as high as $6.05 this year and closed yesterday up 3c at $4.10, still suffering the effects of the Government's decision to open its network to competition.

Shareout

* NZX granted Telecom a waiver to issue discounted options to employees.

* The waiver will apply to the future issue of options, not to options already on issue.

* The waiver will not help Telecom staff to recoup any losses on options already issued.

* Telecom's share and option remuneration schemes covers 600 employees.