TPG Telecom Lead Bidder for AAPT

WELLINGTON/HONG KONG (Reuters) – New Zealand’s Telecom Corp (TEL.NZ) is in negotiations to sell its Australian subsidiary AAPT to TPG Telecom (TPM.AX), which has bid about $400 million for the company, a source told Reuters.

TPG was selected as Telecom’s preferred bidder after its offer for AAPT trumped three other bids, a source close to the process said, speaking on condition of anonymity because he was not authorised to speak publicly about the negotiations.

Telecom and TPG declined to comment.

Other bidders who submitted proposals were privately held Pacnet, private equity firm Quadrangle Group and Optus, the fully-owned Australian unit of Singapore Telecommunications (STEL.SI), said the source.

Last month Telecom said it was open to offers for AAPT, Australia’s third-largest telephone provider, which it does not regard as a core operation, but has refused to say whether it is actively seeking to sell the company.

Analysts have estimated AAPT to be worth around A$400 million ($362 million), with the TPG offer put at around A$440 million. In 2009, AAPT reported earnings before interest, tax, depreciation and amortisation (EBITDA) of A$73 million, down from A$100 million the previous year.

Pacnet was reported to have made an unsolicited $420 million offer for AAPT in late 2008.

Shares in Telecom were trading steady at NZ$2.15 in a broadly weaker market. TPG, Australia’s fifth-largest telephone company and formerly called SP Telemedia, last traded down 0.9 percent at A$2.25 in a broader market 1.6 percent lower.

TPG, which has a market value of A$1.7 billion, said it expected EBITDA for the year to July 2010 at between A$152 million and A$158 million.

In March 2010, TPG acquired telecommunications infrastructure business Pipe Networks PWK.AX through a A$373 million scheme of arrangement.

Telecom, which is due to report its third-quarter results on Friday, last month revised downward its forecast earnings for 2011 to 2013, citing falling revenue, increased regulation and the impact of the economic downturn.

Telecom bought AAPT progressively between 1999 and 2001, investing an estimated NZ$3 billion ($2.2 billion) in the business, which has struggled to make headway in a market dominated by incumbent Telstra Corp (TLS.AX) and Optus, owned by Singapore Telecommunications. (STEL.SI). ($1=A$1.11, NZ$1.38)