AAPT dials up sudden lift on Telecom stock

By RICHARD BRADDELL

WELLINGTON - A sharp change in fortunes for Australian subsidiary AAPT put the fizz back into Telecom stock yesterday, taking it close to its highest levels in a year.

After languishing below $9 for most of the past 12 months, Telecom surged 85c to close at $9.45, not far from its year peak of $10. Trading of 12.2 million Telecom shares accounted for $112.6 million of a busy day's trading worth $183.9 million for the entire market.

But there was little evidence that euphoria was spilling into other stocks. Falls outnumbered rises 63 to 49, and while Telecom was up 9.9 per cent, the NZSE-40 index still managed a rise of only 2.5 per cent.

Telecom's performance owed little to its own prospects and more to its 81 per cent ownership of AAPT, which has suddenly won investor approval following the announcement that it is to spend $A450 million on a new CDMA (Code Division Multiple Access) cellular network.

In the past two days, AAPT stock has shot up more than $A2 to peak at $A7.99 before closing yesterday at $A7.30.

The fact that yesterday's closing price is 43 per cent more than the $A5.10 a share Telecom paid in its $A1.6 billion foray into AAPT is having an inevitable impact on Telecom stock.

AAPT's strength will also help if Telecom decides to sell down its holding to raise capital for further investments in growth areas.

Australian analysts say AAPT's sudden popularity lies in the fact that the appointment of Lucent Technologies to build its CDMA network, and several other infrastructure investments, signal that Telecom no longer intends to sit on its hands with its Australian offshoot.

While analysts are downgrading AAPT's expected earnings over the next two years, they expect the company to rebound strongly as its cellular business, and investments in the Local Multipoint Distribution System and fibre come on stream.

Meanwhile, the shine has come off AAPT's two larger rivals, Telstra and C&W Optus.

Although there is no specific gripe with Optus, its share price is seen as having gone as far as it can now.

But while Telstra is expected to maintain its strong earnings growth when it reports its first half in a couple of weeks, the quality of its revenue is expected to underwhelm, with one-offs and accounting changes helping to keep things on track.

However, institutions wanting to switch into AAPT are finding a shortage of scrip, since it became mostly retail investor-owned after Telecom took control last year.