Telecom this week revealed details of how its assets will be split between network company "New Chorus” and retailer "New Telecom” if shareholders approve the planned de-merger later in the year.
The proposed divvy-up didn’t present any major surprises, according to IDC. The announcement did, however, throw the spotlight back onto CEO Paul Reynolds, who has committed to staying at the helm of the retail operation through the transition phase. But what happens after that?
Speculation Reynolds will quit New Zealand next year has been centred around the assumption that the Scotsman’s $5 million annual pay packet would face a substantial trimming as he transitioned to running a retail company that will only be about half the size of the old business.
But outgoing Telecom chairman Wayne Boyd this week hinted that because of the complexities involved in the de-merger, Reynolds’ remuneration package could remain intact through the transition period.
But as Boyd pointed out in another interview, the duration and payment details of the CEO’s new contract are yet to be fleshed out with the company’s board of directors.
The same is true for "New Chorus” boss Mark Ratcliffe. Telecom directors will be only too aware that CEO contracts are a balancing act between financial constraint and offering a deal that encourages peak performance. Shareholders will be watching closely and won’t be shy about commenting on whether they believe the board gets the balance right.
But with analysts picking the Telecom break-up could cost between $200 million and $400 million in total, CEO remuneration is obviously just a small part of a wider picture as the company undertakes a massive corporate restructuring.
Given all this upheaval has been necessitated by Chorus securing its major UFB contract, what really matters is that the de-merger works and the fibre broadband network is a success.
Reynolds and Ratcliffe have a big job ahead of themselves ensuring that happens.
