Verizon exits Telecom stake

By NZPA

Thursday 26th September 2002

American telephone giant Verizon Communications said today it had agreed to sell its stake in Telecom Corp.

In a substantial security notice filed with the New Zealand Stock Exchange late today, Bell Atlantic Holdings Ltd (BAHL) -- the Verizon subsidiary which owned the stake -- said it would sell 370 million Telecom shares, or about 20 percent of the company, to institutional investor Merrill Lynch, Pierce Fenner and Smith Inc.

"On September 26, 2002 BAHL agreed to sell 370 million shares to Merrill Lynch, Pierce Fenner and Smith Incorporated for its own account and the accounts of its customers," the notice said.

No price was disclosed for the sale, but at Telecom's closing price today of $4.82 the stake would be worth about $1.78 billion.

The news ends months of speculation over when Verizon, Telecom's biggest shareholder, would sell.

The company, previously Bell Atlantic Corp, sold $US2.5 billion ($NZ5.36 billion) worth of five year convertible bonds in 1998 using its then 25 percent stake in Telecom as security.

The slide in Telecom shares during the last two years meant investors were highly unlikely to convert the bonds which mature in April 2003. Verizon had clearly flagged it wanted to sell t he stake rather than further stretch its balance sheet by raising new debt, but had said it favoured gradually selling its holding below 20 percent.

BAHL said today it had sold 11.4 million shares in Telecom on the New Zealand and Australian stock exchanges between January 14 and April 24 this year.

Those sales went undetected as they were below the 1 percent threshold that triggers a substantial security notice like the one issued today.

Shares in Telecom were suspended in the Australia following the announcement -- which came after the close of business on the local exchange -- to allow the transaction to go ahead overnight, New Zealand time.

Telecom could not immediately be contacted for comment on the sale.

It is seen as positive news for the company, as persistent rumours that Verizon planned to hawk a large chunk of Telecom have weakened its share price.

"It clears a shareholding block which has been overhanging the market for some time," Forsyth Barr telecoms analyst Jeremy Simpson told Reuters.

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