Telecom looks at float for Xtra

By GEOFF SENESCALL and RICHARD BRADDELL

Telecom is understood to have appointed Credit Suisse First Boston to advise it on the possible float of its internet vehicle Xtra.

However, it is believed that a final decision by the Telecom board has yet to be made on whether to spin off the country's largest internet service provider.

If the float button were pushed, it is expected that Xtra would be floated some time this year.

Market analysts reckon that if Xtra were floated, it could fetch up to $1.5 billion.

It is likely that Telecom would float only a small portion of the shares, possibly between 25 and 40 per cent.

Ultimately, it would want to capture most of the upside from the high-growth sector for itself.

Telecom hinted in February at spinning off some of its new investments as a way of unlocking shareholder value, which currently was not being reflected in the share price.

While Credit Suisse First Boston's focus is on Xtra, it is likely Telecom is considering a wider range of possibilities, which would include both its New Zealand and Australia assets.

Analysts believe that Telecom would fetch a better price from a vehicle combining some of its New Zealand and Australian assets, including mobile telephony and internet.

Speculation in the Australian press suggests that such a plan is "under discussion."

However, Telecom moved yesterday to dampen reports that its plans were well advanced for sell-downs of its internet and cellular businesses.

Chief executive Theresa Gattung said Telecom had indicated on many occasions that it was looking at its options. They might include but were not limited to partial floats of one or more business units.

Ms Gattung said market speculation had increased after Australian media coverage following her visit to the Australian Telecommunications Users Group annual conference in Sydney this week.

The Australian Financial Review reported her as saying that the potential spin-off of assets such as internet and cellular businesses owned directly and by APPT, Telecom's 81 per cent Australian subsidiary, would be considered by the Telecom board next week.

The paper reported Ms Gattung as saying that a spin-off would be likely to include AAPT's $A100 million half interest in internet service provider AOL as well as its business-to-business provider connect.com.

The Sydney Morning Herald, meanwhile, said it was understood that AAPT and Telecom were looking at pooling their mobile phone businesses into a separate company that would be listed in the December quarter.