Telecom Chief Executive Quits

31 August 2011 - Which Way to Pay

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Telecom Chief Executive Quits

After nearly five years as CEO of Telecom, Paul Reynolds will leave the company in 2012. However, Reynolds will lead the company through the demerger with Chorus in November amidst a search for a new chief executive to direct the company from the 2012/13 financial year.

The demerging will result in Chorus receiving Government funding of $929 million as a separate public company to roll out a fibre network to most of the country. Indeed, Telecom proposed to split into separate entities in a bid shed the heavy regulatory burden of operating a copper-line network monopoly, and win tax-payer funding to build a nationwide fibre network.

The split has been commented by some market analysts as one of the biggest corporate shake-ups since the 1990s. After all, Telecom is the country's second biggest listed company and despite profits plummeting more than 50% in recent times, it revealed a strong bill of health earlier this month. However, upon the announcement of Reynolds departures and further details of the demerging process have pushed Telecom shares down 4.36% to $2.52 on the NZX this morning.

In the 2010 financial year, Reynolds, 54, earned a pay packet of more than $5 million and is said to be excited by the challenge of leading the company through a new industry structure. However, he said that after five years in the role it was a good time to "hand over to a new CEO".

"Meantime, I'm determined to ensure that New Zealand, Telecom's customers, our people and our shareholders benefit from the demerger and UFB” he said.

After completion of the split, New Telecom will be the larger of the two companies, with adjusted pro-forma earnings before interest, tax, depreciation and amortisation of $1.125 billion on $5.1 billion of sales in the 12 months ended June 30, while Chorus made $676 million on $1.1 billion of revenue.

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