Telecom's third attempt to sell its underperforming Australian division, AAPT, seems to have fallen over.The one remaining bidder, TPG, has dropped out of the race, according to media reports across the ditch this morning.The rumour-mill has it that Telec
Telecom’s third attempt to sell its underperforming Australian division, AAPT, seems to have fallen over.
The one remaining bidder, TPG, has dropped out of the race, according to media reports across the ditch this morning.
The rumour-mill has it that Telecom’s board wanted upwards of $A400 million for AAPT (that is, around 4X ebitda), while TPG would not budge from $A350 million.
It has also been mooted that TPG had concerns about a key AAPT wholesale deal with Telstra.
Telecom chief executive Paul Reynolds bragged during a May briefing that better wholesale terms had been negotiated with Telstra, boosting ebidta.
But TPG is said to have been concerned there was no guarantee the wholesale deal would rollover on favourable terms.
A second potential bidder, tiny Amcom Telecom, simply couldn't rustle up enough lettuce.
And yesterday, Pacnet - the most serious AAPT bidder in the previous round of negotiations - ruled out making an offer, its ambition apparently sated, for the moment, by its new alliance with Pacific Fibre.
AAPT retail arm may be sold
However, there is consolation prize for Telecom.
AAPT is a wholesale specialist, but it also has a modest size consumer business, with 120,000 broadband and 230,000 voice customers.
Speculation is the consumer division will be sold to internet service provider iiNet, itself 18% owned by Telecom.
Telecom bought AAPT at the height of the dot.com boom for $A2.3 billion.
In 2007, it bought wholesale specialist PowerTel for $A357 million, and folded it into AAPT.
PowerTel’s assets included the 18.1% stake in iiNet, which Telecom today values at around $A13.3 million.
The longer they wait, the lower the price
The current round of negotiations represents at least Telecom’s third attempt to sell AAPT.
In December 2008, Pacnet was widely reported to have offered $US420 million.
At the time, market analyst Paul Budde told NBR that with the Australian market consolidating into a few big players, and AAPT lacking the scale to compete, Telecom should sell the non-strategic asset.
And do so soon.
“The longer they wait, the lower the price,” Mr Budde said.
