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Telecom New Zealand is attempting to sell its 10 per cent stake in mobile business Hutchison Telecommunications Australia along with corporate telecommunications provider AAPT as part a moves to raise capital by selling non-core assets.

The Australian Financial Review revealed on Monday that Telecom New Zealand had initiated a sales process of AAPT for a select group of potential bidders.

It is also believed Telecom New Zealand is planning to sell its 10 per cent stake in HTA, which it owns through a vehicle known as “Telecom 3G Australia”. The rest of the company is largely owned by Hong Kong-based Hutchison Whampoa Limited.

HTA in turn owns 50 per cent of Vodafone Hutchison Australia. This means any buyer of the stake would own 5 per cent of Vodafone’s Australian operations.

HTA has experienced a sharp increase in trading and share price that the company has not been able to explain over the past two months.

This resulted in two official requests for information from the Australian Securities Exchange, known in the industry as “speeding tickets”.

A spokesman for Telecom New Zealand said the company did not comment on market speculation or rumour. AAPT owns a fibre optic cable network that links various cities and commercial hubs throughout Australia and its sale could be worth more than $400 million.

Fibre optic cables


It is understood that potential bidders are meeting with the Macquarie bankers handling the deal over the next week. The initial bidding process could then start as early as next week. An information memorandum has been circulated among potential bidders.

AAPT’s best assets are its fibre optic cable networks, according to analysts.

“This includes 11,000km of interstate fibre, its own data centres in major capital cities, fibre access to 1600 premises,” Telecom New Zealand said in its 2013 annual report. “AAPT has access to DSL coverage in over 400 exchanges focused on the major ­Australian cities and large metropolitan areas.”

Analysts add the most likely bidders for the assets are TPG Telecom, M2 Telecommunications, iiNet and the Ontario Teacher’s Pension Plan.

But the business has also experienced a steady decline in earnings before interest, taxation, depreciation and amortisation. It reported EBITDA of $57 million in financial year 2013, which was 14 per cent lower than the $67 million it reported the year before.

Nextgen Networks was also a major owner of intercity fibre optic cabling with an EBITDA of $125 million. Some 70 per cent of it was sold to the Ontario Teacher’s Pension Plan in February in a deal that valued the company at $885 million. If AAPT is sold at the same EBITDA multiple, the deal could be worth $403.5 million.

But sources close to the deal are sceptical because of the company’s sliding earnings and questionable future and say its value could be closer to between $250 million and $300 million.

According to one analyst who could not be named, the problem was that a large portion of the business was unattractive to buyers.

“There are things like the transit network that are really excellent and then things like voice-calling and enterprise frame relay deals that are not,” they said. “So some bidders might pay 10 times EBITDA for the network assets but only four times EBITDA for the other stuff.”

The sale of AAPT has long been mooted as an option for Telecom New Zealand, which has experienced falling profits as it completes a restructuring under chief executive Simon Moutter.