Telstra the Clear favourite in telco sale

By PETER GRIFFIN

The sale of the country's second largest telecommunications company, Clear Communications, is "signed and sealed," says a high-level source close to TelstraSaturn.

Unconfirmed reports of final negotiations between British Telecom and Telstra over a purchase price for Clear have swept through the industry fuelled in part by Telstra's move last month to take over a $A150 million ($184 million) commitment from Austar - its troubled partner in TelstraSaturn.

Several scenarios have emerged for a Clear-TelstraSaturn venture - which would inevitably emerge if Telstra were to buy Clear.

But official word of negotiations, let alone a sale, has not been forthcoming.

But a source close to TelstraSaturn said Telstra had finalised a deal with BT to buy Clear.

He could not confirm a figure, but estimates of BT's asking price for Clear have ranged from $450 to $500 million.

And a party involved in the Jump Capital, Berkshire Partners and Todd Corporation consortium, which was believed to have been in negotiations with BT for Clear, said the group was definitely no longer interested, leaving the way clear for Telstra.

Public notice of any sale would have to be given to satisfy the Stock Exchange listing requirements of BT and Telstra - an announcement that may be imminent.

A senior management reshuffle at TelstraSaturn before year's end was also likely, said the source, with Telstra management coming on board within weeks to replace outgoing TelstraSaturn directors and chief executive Jack Matthews.

"What you are likely to see is a bunch of Australians getting off the plane in the near future," the source said.

With Telstra executives in place, questions may surround the future of TelstraSaturn's cable TV business, operational in Wellington and parts of Christchurch with around 25,000 subscribers.

According to the source, TelstraSaturn would ditch the cable TV service, in favour of a resale agreement with rival pay TV operator Sky - using the existing cable network where possible.

TelstraSaturn instead would concentrate on core telecoms business such as broadband access and long-distance call services - especially transtasman toll services where it could offer Telecom strong competition.

Sky's spokesman Tony O'Brien and TelstraSaturn's corporate development director Deanne Weir would not comment on the claims.

Any marriage of Clear and TelstraSaturn would undoubtedly produce an overlap of resources, with the two companies duplicating network infrastructure in main centres, and both focusing on the business market.

TelstraSaturn lost $85 million for Telstra in the past financial year and analysts forecast that the company is unlikely to turn a profit within the next five years.

Sydney-based telecoms analyst Paul Budde said it made sense for TelstraSaturn to wind down its cable TV business and become "content independent", but he had reservations about how successful a Clear-TelstraSaturn operation could be in challenging Telecom.

"Clear has already retreated to the business market which makes sense, but that remains a niche market. TelstraSaturn's model is not really suited to that - they want to be a national operator."