Telecom's AAPT sale far from a done deal

Deal may take a while, analyst says

Speculation that a sale of Telecom's Australian unit AAPT is imminent may be premature, with sources describing a deal as "evenly poised". Telecom has made no secret of its interest in selling AAPT, and its internal transactions now deal with the company as if it were independently owned, but getting a transaction across the line has been a slog. "It's a really shaky process," one market source said. "If anything's going to happen it's probably four weeks away." Guy Hallwright, a telco analyst at Forsyth Barr, said there were plausible buyers being talked about, such as ASX-listed TPG Telecom, but there was little to force a quick deal. "It could take a while because Telecom doesn't need to sell it." Telecom wanted more than $500 million, he said, and had little incentive to accept less. AAPT reported annual earnings of $88m ended June 2009, and $87m the 2008 year, but is seen as a relatively weak player in a market dominated by Telstra and Optus. Certainly rumours of a deal have not helped TPG, whose shares have fallen almost a fifth in the last week. Other names in the frame have include Australian private equity firm Quadrant and small telco Amcom, whose shares have also fared poorly of late, falling from A32c to A29.5c yesterday. While AAPT is now a modest earner, it has proved a huge value destroyer for Telecom since its acquisition in 1999, with more than $1.7 billion written off. At an investor briefing in May, AAPT's presentation focused on cost-cutting and lower capital spending, as it coped with falling turnover from its calling businesses. The bright spot was forecast growth in data and internet revenue — the area of most interest to potential buyers.

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