According to the reports released by a Business Magazine on Thursday, Australia based company Telstra has stated that it would sell its struggling operations in New Zealand to Vodafone, an operator of mobile services in Britain. This step will help bring more muscle for competing with Telecom New Zealand which is the leading telecommunications provider in the country.
Telstra has made a deal with Vodafone to take over its trans-Tasman subsidiary named TelstraClear for NZ 840 million dollars or 430.4 million pounds. After the finalization of the deal that is contingent on the regulatory approval of New Zealand, Telstra will supposedly return an amount of $NZ490m ($380m) all in cash to Australia by means of a pre completion dividend that is consolidated already in the results of the Telstra groups. This deal will also result in Vodafone New Zealand taking over the network infrastructure, customer base and voice and data-based services of TelstraClear in New Zealand.
The Reports and Results on the Deal:
According to the statement of CEO of Telstra Mr. David Thodey, the deal is quite a natural and smart one that will merge the corporate client base and the data and telecommunications products of Telstra with the retail customer base and mobile offering of Vodafone New Zealand. This deal will provide Vodafone nearly 30% of the broadband market of New Zealand apart from the mobile services that it has only been confined to till now. It will also heat up the competition with Telecom TEL.NZ that currently covers more than half of the market in New Zealand. This deal was largely under expectation after Vodafone and Telstra confirmed last month that they have been talking about the struggling sales of TelstraClear.
The market scenario:
The shares of Telstra already listed in New Zealand and Australia, were not in trade in the stock exchange of New Zealand even after the lifting of a trading halt after the announcement was made. Their shares closed at 3.860 Australian dollars in the market of Australia on Wednesday. This was a rise as high as 3.875 Australian dollars, their highest rise since the year 2008. Shares of Telecom on the other hand slipped down by 1.0% after the announcement was made. TelstraClear has for some time now been affected by the higher capital expenditures and lower revenues. This is mainly because of the fact that they have had to rebuild their network infrastructure in Christchurch that was damaged by an earthquake in the year 2011. According to reports from Telstra, they are going to take an impairment charge 260 million Australian dollars for the next two years that reflects the losses mainly from the foreign exchanges. There have been speculations among the market participants that Vodafone was interested in the acquiring of the 4G spectrum that is essential for the high speed mobile data services. It was expected of TelstraClear that it will make gains in this field following the shift of the nation towards digital television that is supposed to begin sometime around the end of this year.