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Vodafone to buy NZ Telstra operations

by Andrew Bulkeley | Published July 12, 2012 at 9:10 AM

The U.K.'s Vodafone Group plc on Thursday, July 12, agreed to buy the New Zealand unit of Australia's Telstra Corp. for NZ$840 million ($668 million).

Telstra's TelstraClear Ltd. division in New Zealand offers traditional phone, data and cellular services and is the second-largest fixed-line operator, with a 16% market share. The combination with Vodafone's 13% market share will make the U.K. company a clear No. 2 in New Zealand, where it is already the biggest wireless services provider. It will still lag well behind the 49% fixed-line share held by incumbent Telecom Corp.

The purchase comes the month after the Newbury, England company completed a £1.04 billion ($1.67 billion) offer for Cable & Wireless Worldwide plc to gain a global fixed-line network to woo corporate customers and improve service to smartphone users, who are gobbling up cellular bandwidth by increasing their mobile Internet habits.

In a statement Vodafone CEO Vittorio Colao said of the TelstraClear deal: "The proposed transaction offers significant benefits for New Zealand businesses, consumers and the country as a whole. TelstraClear's infrastructure and capabilities are highly complementary to those of Vodafone New Zealand."

TelstraClear revenue slipped 4% in the six months ended Dec. 31 to NZ$339 million as competition and the impact of the Christchurch earthquake in February 2011 dampened sales. It returned to profit in the period, with Ebit of NZ$1 million, up from an operating loss of NZ$9 million in the same period a year earlier.

TelstraClear has about 270,000 traditional phone customers and another 50,000 mobile phone customers.

Telstra July 5 admitted it had been approached by Vodafone about a possible deal for TelstraClear and confirmed it was in talks. The Australian company said the deal would allow it to return NZ$490 million to shareholders as part of a dividend.

Telstra also said it expects as a result of the sale to take A$130 million ($131.6 million) in charges in each of the fiscal years ending June 2012 and June 2013 for foreign currency losses.

Rival Telcom said it wasn't worried about the movement on the New Zealand phone market. "We also know how distracting major transactions such as Vodafone's can be at both a regulatory and local execution level, and it is not a done deal yet," Telecom CEO Chris Quinn said in a statement.

Telstra shares closed A$0.01 lower in Sydney Thursday at A$3.85, while Vodafone slipped 1.1%, or 1.95 pence, to 182.10 pence ($2.82).

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