[reuters] New Zealand's dominant phone provider, Telecom Corp , said on Tuesday it expects to split its network operations into a separate company by the end of year as it starts building a government-sponsored broadband network, sending its shares to a near-16 month high.
Telecom said it expected to start work later in the year on rolling out the network in 24 regions, including the biggest city Auckland and the capital Wellington, the lower North Island and most of the South Island.
But the NZ$1 billion ($790 million) deal will force Telecom to demerge its network company, Chorus, into a separate listed entity, while it changes into a telecommunications retailer.
"We are absolutely clear that this is a positive deal for our shareholders, as well as delivering an effective fibre programme for New Zealand," said Telecom Chief Executive Paul Reynolds.
The structural separation, which Telecom had put forward to satisfy competition concerns, still requires a law change and shareholder approval.
It will be done through a court approved scheme, which will leave Telecom shareholders with stakes in the two companies.
Under the agreement, the government's Crown Fibre Holdings will invest NZ$929 million in Chorus through a mix of debt and equity as the broadband network is built.
The shares will be non-voting and no dividends will be paid before 2025, wile the debt will be unsecured and non-interest bearing.
Telecom NZ to split by year-end for broadband build