|Following the sale of YPG in April 2007 for $2.161 billion Telecom announced on 3 May 2007 its intention to make a capital return to shareholders of approximately $1.1 billion via a shareholder and court approved Scheme of Arrangement. Under the Scheme of Arrangement one in nine ordinary shares were cancelled on a pro-rata basis in exchange for NZ$4.88 for each cancelled share. The Scheme of Arrangement was approved by shareholders at a Special Meeting on 17 August 2007 and final High Court approval was obtained on 3 September 2007. The capital return was successfully completed in October 2007.
Australian shareholders received approximately AUD$4.17 per cancelled share. Telecom has obtained a determination and corresponding class ruling from the Australian Tax Office in relation to the Australian tax treatment of the capital return proceeds.
Immediately following the capital return the ratio of ADRs to ordinary shares was changed from 1 ADR to 8 ordinary shares to 1 ADR to 5 ordinary shares. From an ADR holder's perspective the combination of the capital return and ratio change resulted in the receipt of approximately US$3.27 for every existing ADR held and the issue of 42.2% more ADRs.
In the view of the Board, the $1.1 billion capital return provided sufficient flexibility to accommodate any deterioration in the operating outlook and a significant ongoing capital expenditure programme (including the build of a WCDMA mobile network), while still retaining the ability to defend a strong "single A" credit rating from both Moody's Investors Service and Standard and Poor's.
Key dates in relation to the capital return are set out below.