Tuesday, February 13, 2007

Amcom admits to talks with Telecom NZ

As I reported earlier Telecom Corporation of New Zealand Limited (ASX:TEL) has been on the acquisition hunt with the cash they are expecting to receive from their sale of the New Zealand Yellow Pages business. Amcom Telecommunications Limited (ASX:AMM) has admitted that they have had discussions with Telecom Corporation of New Zealand (NZ).
The small Western Australian telco confirmed that industry rationalisation had been discussed with the NZ group. Acquisition of Amcom would give Telecom NZ a controlling stake in Internet service provider, iiNet, as well. This is indeed an added bonus on this purchase. However, any deal will depend on rural company, Futuris Corporation Limited (ASX:FCL), which holds a 47 per cent stake in Amcom. Telecom NZ has also made a $A320 million bid for PowerTel Limited (ASX:PWT).

As I have said earlier I think this could be a good buy for Telecom NZ. The more I think about this deal the more I like it. I think getting iiNet thrown in will be a short term cash earner. Telecom NZ has not had to take the major risk of turning iiNet around (it is slowly happening) as it is a more stable company today then it was several months ago. My preference (and probably Telecom NZ's management) would be to wait till iiNet builds up their subscriber base again and then sell it to a competitor. I don't think Telecom NZ want to be in the business of an Australian Internet provider.

Overall Telecom NZ's management has done well in the face of regulatory issues and is building value for its shareholders. As a longer term share I am wary that further regulatory problems could arise so I don't think it is a great buy at the moment.

Good Luck Investing.

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