Long-suffering Telecom shareholders, recalling the heady days of shares trading around $8 to $10, must decide shortly what impact the proposed company split will have on the present $2.60-per-share price, and at what level the market will price New Chorus shares when those start trading.
"We have to decide whether to stay, or get out," one investor said during question time.
Telecom's chief executive, Paul Reynolds, fronted up to more than 70 investors in Dunedin yesterday, brandishing a more than 500-page demerger "book", which was required by United States regulators because of Telecom's listing on the New York stock exchange.
Telecom's board is unanimously recommending the split.
Mr Reynolds yesterday outlined the breakup of its retail and network/lines business into respectively New Telecom and New Chorus; with shareholders due to vote on October the 26 on the proposal, and if successful, for demerging, which would happen on November 26.
The demerger would allow New Chorus to participate in the Government's ultrafast broadband programme; having won $930 million from the Government to install fibreoptic cabling around the country, while New Telecom retains its mobile network, retail business, IT and internet services.
Mr Reynolds said aside from the $930 million from the Government, the split had four "key" components.
New Chorus would be a major cornerstone founding partner, it would align its interests with the Government's, avoid being in competition with other Government-backed companies, and the present "harsh" regulatory regime would diminish.
However, during question time an investor asked how Mr Reynolds saw the present $2.60 Telecom share price and how it was expected to be reflected in the New Chorus shares.
"Telecom at $8 to $10 [per share] was a young company.
Then it got a bit flabby. As a middle-aged company it can do better [but] we can't turn the clock back," Mr Reynolds told the investors.
He did say New Chorus would pay a 25c-per-share dividend, pro-rata for seven months for 2012, but noted its board would then review future dividends.
He said financial requirements in the US precluded forecasting of revenue and trading for New Chorus, and after the shareholder meeting, said the market would ultimately decide the share value.
Forsyth Barr research director Guy Hallwright was contacted after the meeting and said an independent report had valued New Chorus in a range of $2.92 to $4.61, with the brokerage picking a price closer to $5 per share.
Telecom's post-demerger predicted range from the independent report was $1.73 to $2.33, but Mr Hallwright predicted about $1.65.
Last week Telecom sweetened its offer to bond holders, owed $541 million, in a bid to get the deal over the line, The New Zealand Herald reported.
The Auckland-based company raised the fee on offer to its Telebond holders from 0.25% to 0.5%, following discussions with investors.
That will cost the company an extra $1.35 million as it pays out a total $2.7 million in fees to investors. Telecom will top up its annual interest payment to bondholders by 0.5 percentage points if its credit rating is cut below the A band.
While the roadshow in Dunedin was the first of seven nationally this week, it was the 41st of 101 shareholder meetings being held in New Zealand, London, Los Angeles, Sydney and Edinburgh, as an opportunity for Telecom's management to convince shareholders of the split's merit.
