Optus to float as dispute settled

A deal between the four Optus Vision shareholders - Optus Communications (46.5 per cent), US West (46.5 per cent), Mr Kerry Packer's Publishing and Broadcasting (5 per cent) and Seven Network (2 per cent) - was struck at 3.30 am yesterday, after months of haggling.

Optus Communications will own all of Optus Vision after buying out the other three with share offers.

Seven, which set off the protracted negotiations with its October lawsuit over a shareholding agreement for Optus Vision, was a big winner. It got the right to buy 50 million Optus shares at $1.25 apiece. Optus shares are expected to be sold at between $2 and $2.50 each in the float.

Seven also got an entitlement to buy a further 50 million shares in the float.

In return, Seven agreed to drop the legal action that thwarted the float process.

Mr Kerry Packer's PBL will get an option to buy 30 million Optus shares at $1.50 each.

It will also have an entitlement to a further 25 million shares in the float.

Both companies will retain their interests in the programming vehicles - MovieVision and SportsVision - which will remain outside Optus. SportsVision has exclusive pay-TV rights to show AFL.

American telephone company, US West, will also get the right to buy an unspecified number of Optus shares, although the company would not reveal the details yesterday.

US West's continuing involvement is critical to Optus's local telephony ambitions. The American phone company is charged with making the local telephony technology work, after nine months of problems since the ambitious launch last June.

US West will get a success fee of up to $100 million, linked to how many subscribers sign on for the local telephone service by December 2000.

Optus Communications's major shareholder, Mayne Nickless, has agreed to pay this success fee. In return, Mayne Nickless has been issued 30 million shares in Optus Communications, at $1 each, which will be retained after the float.

Optus Communications's chief executive, Mr Ziggy Switkowski, said last night it was "a very tough performance level to achieve".

Mr Switkowski said Seven, PBL and US West would collectively hold between 5 and 10 per cent of Optus Communications after the float.

The exact percentage of their combined shareholdings will be known by the end of April when the Optus Communications board decides how much equity will be raised in the float.

Optus Vision has a heavy debt burden and would have needed a $400 million equity injection at the end of this month.

The total financing now rests with Optus Communications, which has agreed with its banks to raise additional equity in the float to cover Optus Vision's requirements. This should see the float value increase from the original target of $1.5 billion to more than $2 billion, with about 40 per cent of the shares floated.

Mayne Nickless's managing director, Mr Bob Dalziel, said a prospectus could be ready by the last week of June, with a listing on the sharemarket six weeks later. This would see Optus listed on the market in August, two to three months ahead of Telstra.

Mayne intends to sell its 24.9 per cent stake into the float.

Mr Switkowski described the merger of Optus Communications and Optus Vision as a "sensational outcome". He also predicted the restructuring would be a major step towards rationalising Australia's pay-TV industry, which has lost $1.2 billion in under four years.

He said Optus Communications could now push ahead and hold discussions with Telstra about a cheap entry into the local telephony market, in return for Telstra's gaining access to Optus Communications's overhead cable network. With Optus Vision as a separate entity, this had been a difficult aim.

The move should see the rationalisation of programming in the pay TV industry. Optus Communications is expected to announce in the coming weeks a spin-off of its pay TV programming interests to a buyer. This is likely to see a merger of the two rugby league competitions.

All of the players, including Mr Rupert Murdoch's News Corp, have been involved in discussions in recent weeks.

THE PAY TV SHAKE-UP

Optus Vision shareholders: Up to 10% after float

SEVEN NETWORK

* drops damaging lawsuit

* gets right to buy 50m Optus shares at $1.25 each and 50m more at float price

* retains 30pc stake in SportsVision, 8.3pc in MovieVision (pay TV programme providers)

PUBLISHING & BROADCASTING

* gets rights to buy 30 million Optus shares at $1.50 each and 25 million more at float price

* retains 20pc stake in SportsVision, 8.3 pc in MovieVision

US WEST

* forgoes $605m investment in Optus Vision

* but gets convertible note to buy Optus shares

* gets up to $100m if it achieves targets for local telephony

OPTUS COMMUNICATIONS

* Full steam ahead for $2bn public float, takes over Optus Vision, in which it invested $605m* Local and long distance calls, mobile, pay TV all under one roof

* Pay TV programming contracts intact

Optus Vision shareholders: 26.1%

MAYNE NICKLESS

* will pay up to $100m to US West for its local calls incentive

* buys 30million new shares at $1 each lifting stake from 24.99pc to 26.1 pc

* can proceed to sell stake through float

Optus Vision shareholders: 73.9%

OPTUS SHAREHOLDERS

BellSouth: 24.5pc

Cable & Wireless: 24.5pc

AMP Society: 10.3 pc

AIDC: 9.6 pc

National Mutual: 6.1 pc