Wellington, Dec 23: Shares in New Zealand's largest listed company, Telecom Corporation, plunged 9.2 per cent on Tuesday on news that Ameritech Corp and Bell Atlantic Corp each planned to quit their 25 per cent holdings.Telecom, which has a quarter weighting in the NZSE-40 share market index, fell 80 cents to NZ$7.90 ($4.57).

The share market itself was dragged down 3.3 per cent.

The US "Baby Bells" were original stake holders in the New Zealand phone company since the government sold it in 1990 for a total of NZ$4.25 billion.Telecom's market capitalisation on Monday was nearly NZ$14.5billion and Ameritech said it valued its 24.95 per cent stake at $2.2 billion.

Ameritech said it would sell its stake via a public offering while Bell Atlantic would offer medium-term notes exchangeable into Telecom stock.Ameritech said it planned to use the proceeds to fund growth opportunites in Europe and elsewhere.

Chris Jardine of Craig and Co said Ameritech and Bell Atlantic had always been expected to be sellers at some point, and Telecom's recent NZ$1 billion share buy-back had been considered by many to be a pointer to that.He said the 25 percent stake in Telecom coming on the market and the Bell Atlantic's proposal would probably have a diluting effect on Telecom, but he thought the stock was over-sold below NZ$8.

"I actually think there's been a little bit of an over-reaction," he said.Bell Atlantic is to offer medium-term notes exchangeable into Telecom stock at a market premium.It would not be able to call these notes for at least three years and the notes would not be exchangeable by investors for an initial period of 18 months.

Bell Atlantic will retain the option to settle in cash in lieu of delivering shares. It effectively remains a Telecom shareholder for at least three years.

Telecom put a brave face on the news.

"It's pleasing to see that Bell Atlantic is currently retaining its Telecom stock and building a premium into the exchangeable note offering," chairman Peter Shirtcliffe said.

"The changes should substantially widen the shareholding base of the company and provide the opportunity for more New Zealanders to participate in the shareholding of Telecom," Shirtcliffe said.

Telecom Chief Executive Roderick Deane also downplayed the loss of technological backing from the two US giants.

"As far as technology transfer is concerned, Bell Atlantic and Ameritech have certainly been very useful to use, but we have a wide range of sources of technology these days and we will continue to tap into those," he told reporters.

"So that's not really a matter of concern to us ... and in any event the association with Bell Atlantic, on present intentions, will continue for quite some time."

Commenting on Ameritech's move, Shirtcliffe said that for sometime the company had been focusing on Europe where it had substantial holdings in Denmark, Hungary, Belgium, Germany and Norway. The sale of its Telecom holding was a logical move in this context.

Currently less than 20 per cent of Telecom's shares are held by New Zealanders and 70 per cent are held by American investors.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.