AAPT valuation in question

By Phil Boeyen, ShareChat Business News Editor

Wednesday 3rd April 2002

The value of Telecom's (NZSE: TEL) AAPT investment in Australia is in the spotlight again with a Merrill Lynch report suggesting that a writedown of the asset would come as no surprise.

Reuters quotes Merrill Lynch analyst Patrick Russel saying that while a writedown in AAPT would be negative for sentiment it would be positive in the long-term as the company would be likely to commit less capital to the asset.

"Russel said a writedown of the value of AAPT would help the group's overall free cashflow generation and likely enable the company to pay down debt in 2003 onwards at a rate of NZ$200 to NZ$300 million per year," Reuters reports.

In the company's half year report to the end of December 2001 CEO Theresa Gattung said the company's Australian business was improving and it was focusing on operating margins within AAPT and Cellular One and growing the internet and data services of Connect.

"Telecom is making steady progress in Australia, building our position in market segments of higher value to each business and streamlining many of our business processes to reduce cost and raise customer service levels," she said at the time.

Telecom NZ won control of AAPT after a takeover in late 1999, paying around $2.1 billion for the company.

Last September Standard & Poor' noted that Telecom might require significant ongoing capital expenditure to expand revenue growth in the Australian market and in an interview in November Ms Gattung admitted that the company's expenses in Australia were much higher than she would like, especially cost of sales.

Telecom shares closed up 5 cents on Wednesday at $4.93.

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