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Vodafone flags interest in AAPT

Australian telco Vodafone has flagged an interest in AAPT, which is being sold off by Telecom New Zealand (ASX: TEL).

Responding to media reports, Telecom today confirmed that it was considering a sale of AAPT, but had not yet made a final decision. “Telecom is refining its business strategy to become a future-oriented, competitive provider of communication, entertainment and IT services delivered over its networks and the Cloud. The AAPT considerations are consistent with this strategy,” the company says.

Speaking to reporters this morning, Vodafone chief Bill Morrow declared his company’s interest in AAPT’s assets, saying he had been monitoring the sale of AAPT for more than a year. Mr Morrow said AAPT’s 11,000 km fibre optic network, which links Australia’s major cities and major metropolitan areas would be of interest to Vodafone. Mr Morrow noted that AAPT’s infrastructure would allow Vodafone to reduce its cost structure, but also noted that discussions with Telecom hadn’t begun. AAPT’s infrastructure should also allow Vodafone to improve its mobile services, and potentially compete on a more level footing with dominant mobile leader, Telstra Corporation (ASX: TLS).

TPG Telecom (ASX: TPM) has also been named as a potential acquirer, after missing out on Leighton Holdings telecom assets including Nextgen Networks fibre network, data centre provider Metronode and cloud-computing provider Infoplex. TPG was outbid by the Ontario Teacher’s Pension Plan earlier this year, but is keen to ramp up its fibre internet offering to consumers.

Telecom is also rumoured to be considering a sale of its 10% holding in Hutchison Australia (ASX: HTA), which owns 50% of Vodafone. The Kiwi telco is selling off non-core assets to focus on its core businesses.

Foolish takeaway

Vodafone Group could certainly afford to buy AAPT, which is expected to fetch around $400 million. The company recently received US$130 billion from the sale of its stake in US carrier Verizon. Whether it will help Vodafone Australia compete with Telstra is another story.

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Motley Fool writer/analyst Mike King owns shares in TPG Telecom and Telstra.

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