AAPT Re Valued
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As the dogs are barking, Telecom New Zealand will slash the holding value of AAPT and its other Australian subsidiaries by an amount that could reach A$800 million. TNZ also warned that the company will earn millions less than even pessimistic analysts had estimated.

While analysts projected AAPT earnings of sA$110-150 million, Telecom warned the stock exchange on Friday the 2005-06 full-year EBITDA is likely only to be $85-$95 million, setting up a shortfall of between $15 million and $65 million.

TNZ admits that it is holding AAPT and minor investments at too high a price on its books and it could cut as much as $800 million from its nominal $1.4 billion. The group’s corporate spokesman says the review of AAPT is still planned for the next few weeks but suggested the true “stand-alone” value of the Australian subsidiary is $600-700 million.

Even that could be high. NZ analysts still see a prospect of Telecom selling off the Aussie venture – something Telecom has denied at least in the short term, even though it used the term “stand-alone” on Friday. But outside estimates value AAPT closer to $500 million.

Telecom said fundamental changes in the industry, combined with revised expectations for execution within the Australian business, are likely to result in a permanent impairment to the carrying value of the Australian business.

“The revised valuation range would essentially result in the substantial elimination of goodwill. Final details will be disclosed at the second quarter earnings announcement on February 2, 2006,” Telecom said.

In its statement, TNZ says it “identified a number of significant challenges to the short- and long-term earnings outlook for its Australian operations”.
Key problems are seen as a significant tightening of wholesale prices and terms with Telstra; continued downward pressure on retail prices; and the deferral of major projects by key enterprise customers.