List of assets tempting for Telecom

By RICHARD BRADDELL

Telecom chief executive Theresa Gattung has not given up on Cable & Wireless Optus, despite her company looking a distant third in the contest for its control.

In a day-long briefing to top telecommunications analysts in Sydney on Thursday, Ms Gattung said that Optus' mobile business was not the only option. Other parts of the business might also be of interest, if the price was right.

And although there were strong views on possible outcomes, she said conversations were continuing among interested parties that could produce a very different model from the one most people were considering.

The briefing took place as Telecom's bid for Optus looked increasingly hopeless, given the deep pockets of its rival bidders, Singapore Telecom and Vodafone, and the absence of regulatory constraints faced by SingTel.

But according to analysts' reports obtained by the Business Herald, Ms Gattung indicated that Optus' assets in its business, data, consumer and multi-media groups were of interest, as well as its mobile business.

In a wide-ranging discussion, Telecom executives said the company was keen to maintain its credit rating and would exit under-performing assets or those which might not deliver a return.

In further confirmation that it was considering the future of its rural network, Telecom's general manager, network, Simon Moutter, said it was examining divestiture of some markets, potentially including several thousand rural lines.

Ms Gattung also provided further insight into Telecom's Sky Television strategy, indicating that its $193 million purchase last month of the Tappenden Holdings stake was in part motivated by concern that the shares would fall into unfriendly hands.

According to one analyst, she said Sky was the only pay-TV game in town, but noted that Telecom did not make progress on a reselling deal with Sky until it took a 10 per cent stake in its 47 per cent owner, Independent Newspapers.

One clear message from the briefing was that Telecom no longer expects to own all its own infrastructure and would enter into lease, wholesale or partnership arrangements if that made sense.

If, for instance, Telecom failed to win Optus, it would seek to offer mobile through a partnership or through a "mobile virtual network operator" - a vogue term for a reseller of pure mobile network airtime, as distinct from a network operator or offering other services.

Telecom's own customer numbers in the high-speed internet market have grown more slowly than expected, although its Jetstream DSL service added 2000 subscribers last month, taking the total to 9500.

Telecom is working on upgrades to its DSL service with technology enabling high-speed internet access over ordinary telephone lines.