Reynolds to leave Telecom after split

Further details are emerging about Telecom's impending split into two companies, including the replacement of Paul Reynolds as chief executive from 2012.

Further details are emerging about Telecom's impending split into two companies, including the replacement of Paul Reynolds as chief executive from 2012.

Paul ReynoldsTelecom confirmed today that Reynolds would lead it through the process of demerging Chorus – expected to be completed by the end of November – and the establishment of New Telecom as an independent company.

A search for his replacement would likely commence next year, who would head up New Telecom from the 2012/13 financial year onwards.

Telecom chairman Wayne Boyd will also step down, assuming shareholders agree to the demerger.

“I am particularly delighted Paul has agreed to stay on and provide continuity of leadership while the New Telecom business is established under a new chairman and, ultimately, a new CEO. Until then, Paul is fully committed and mandated to lead Telecom towards the completion of the demerger and New Telecom in its establishment as a separate business, building on the momentum we already have in our key markets,” he said.

Reynolds said he had not yet had time to formulate plans for the future but aimed to "retain strong ties with New Zealand".

“I am excited by the challenge of completing the establishment of a new industry structure that is unprecedented in the telecommunications world, and leading Telecom into this new and important era.

“As that process draws to an end during 2012 it will bring to a natural conclusion the transformation programme the board hired me to lead and, after five years in the role, it will be a good time to hand over to a new CEO."

Telecom also announced the next steps to be taken in the process of its structural separation.

A scheme booklet is expected to be released to Telecom shareholders in mid-September, who will then vote on the proposal.

If approved, Telecom will be divided into two standalone publicly listed companies: a focused telecommunications and IT services business (New Telecom) and a nationwide fixed line access network infrastructure business (New Chorus).

New Telecom’s assets will include  network equipment for fixed line calling, the XT 3G mobile network, national backhaul networks, a 50 percent ownership interest in the Southern Cross international cable, and an extensive Australian fixed IP network.

Under the New Zealand government’s proposed regulatory changes, which are conditional on the demerger, New Telecom will be subject to less of the current Telecom- specific regulation and will be on a similar regulatory footing with its market peers.

A range of telecommunications providers will use New Chorus' network to deliver phone and internet services.

UFB network costs

Telecom puts the total cost of deploying the fibre access network to an estimated 830,900 premises in the range of $1400– 1600 million over the period of the UFB network rollout to 2019.

The government's investment through Crown Fibre Holdings of approximately $929 million will be awarded to New Chorus over the deployment period, leaving New Chorus to fund up to $670 million itself.

The average cost to connect a premise to the communal fibre access network will be in the range of $900–1100 per premise in real terms, Telecom said in a statement today.

Debt loads

New Chorus is expected to have approximately $1700 million of net interest bearing debt, while New Telecom will shoulder $750-$950 million.

The New Telecom figure will vary depending on the amount of Telecom's operating, investing and financing cash flows in the period prior to the demerger and market rates.

Dividend policies

New Chorus plans to pay out 25 cents per share per annum for the 2012 financial year. One New Chorus Share will be issued for every five Telecom shares.

Telecom said New Chorus’ first dividend would likely be declared after June 30, 2012.

New Chorus board

New Chorus will be led by chief executive Mark Ratcliffe, financial controller Brian Hall and CIO Ewen Powell.

Non-executive directors include Sue Sheldon, Anne Urlwin, Clayton Wakefield, Jon Hartley, Keith Turner and Prue Flacks.

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