Telecom New Zealand may hold the key to the future ownership structure of the US$1.1 billion Southern Cross cable network after the sale of Cable & Wireless Optus.
But some analysts said an important issue for Telecom NZ, which lost to Singapore Telecommunications in the race for Australia's second largest telco, was whether it could expand or wanted to sell its 50 percent stake in the cable network which connects Australia, New Zealand, Fiji and the US.
Another issue was the interpretation of the pre-emptive right clause in the cable network agreement between the three stakeholders - Telecom, Optus which owns 40 percent and US group MCI WorldCom which has 10 percent in the network.
Telecom has told some analysts that it held a pre-emptive right to acquire Optus' 40 percent stake in the network that could be triggered by a substantial change in Optus ownership, Burdett Buckeridge & Young analyst Mark McDonnell told Reuters.
"What they have said to me is that the pre-emptive right is triggered in the event of the sale of Cable & Wireless Optus to anybody other than Telecom New Zealand or MCI WorldCom," he said.
"Existing Southern Cross shareholders would have the first right to purchase Optus's 40 percent stake at fair market value based on the current proportional shareholding. Now I've queried this and they have indicated that the effective trigger is that as soon as Cable & Wireless drops below 50 percent ownership of Optus it is triggered," McDonnell said.
Britain's C&W owns 52.5 percent of Optus.
"There is a pre-emptive right there and I guess, depending on the price and how it works out, that is another possibility (for Telecom)...it's a strategically important asset to have," the source said.
However, Optus disputed the analysts' interpretation.
"Our interpretation is that the pre-emptive right is not triggered, that the Optus stake in Southern Cross is not affected by the SingTel proposed offer, and further to that, Telecom has not raised this issue with us," Optus spokesman Steve Wright told Reuters.
Telecom declined to comment.
Another analyst suggested Telecom could be a seller of the Southern Cross stake rather than a buyer.
"It's more likely in fact that Telecom NZ would be interested in monetising its asset by selling its stake to SingTel. I'd be pretty sure they'd be interested," said UBS Warburg analyst Paul Richardson.
In its Optus bid documents, SingTel, Asia's eighth-largest carrier, highlighted the strategic benefits the merged group's network could provide, including new submarine cable systems such as Asia's C2C and Southern Cross.
SingTel, which won the battle for Optus with a complex bid valued at up to AU$17.2 billion (US$8.6 billion), has about 60 percent of the US$2 billion C2C cable network which will eventually loop through seven countries from Japan to Singapore.
