COMCOM: TEL: New requirements for TEL's regulatory financial statements

18 May 2010 8:53 am

TEL 18/05/2010 COMCOM

REL: 0853 HRS Telecom Corporation of New Zealand Limited (NS)

COMCOM: TEL: New requirements for TEL's regulatory financial statements

Media Release

Issued 18 May 2010/ no 110

New requirements for Telecom's regulatory financial statements published

The Commerce Commission today published the new information disclosure requirements that Telecom must follow when preparing its regulatory financial statements. The requirements have been revised following a period of consultation.

The requirements are issued by the Commission under Part 2B of the Telecommunications Act 2001 and mean that Telecom must publish regulatory financial and other information about its network, wholesale and retail business activities and prescribed services. These financial statements are intended to provide useful information to industry stakeholders about the operation and behaviour of Telecom's business activities and services for regulatory purposes. These regulatory reporting requirements are different from, and are in addition to, Telecom's other annual statutory reporting requirements.

"The Commission has always regarded the first year of regulatory reporting as a transition year. The Commission's analysis of Telecom's first regulatory financial statements raised issues about some of the methodologies used in the preparation of the statements, particularly in relation to the attribution of income and expenses and valuation of Telecom's fixed assets," said Dr Ross Patterson, Telecommunications Commissioner. "These revised requirements address these issues."

The Commission's final decision paper and the regulatory financial reporting requirements, along with the submissions received as part of the consultation process, are available on the Commission's website at www.comcom.govt.nz/2010-telecommunications-regulatory-reporting- requirements

Background

The December 2006 amendments to the Telecommunications Act 2001 (the Act) introduced new information disclosure requirements which include the accounting separation of Telecom. The requirements for regulatory reporting differ from Telecom's statutory reporting, such as its annual report, as regulatory reporting uses economic and accounting methodologies which are different from those used for statutory reporting. The regulatory financial statements include detailed reports about each of Telecom's different services groups (which generally align with Telecom's Chorus, Telecom Wholesale, Other Services and Telecom Retail), prepared as if these groups were independent and unrelated entities.

Under Part 2B of the Act, the Commission must require Telecom (as defined by section 5 of the Act) to prepare and disclose information about the operation and behaviour of its network, wholesale and retail business activities as if those activities were operated as independent or unrelated companies. The Commission may also require Telecom to disclose separate information about all or part of separate prescribed business activities or separate prescribed services.

The Act gives the Commission discretion to determine what information Telecom must provide, including the methodologies to be used in preparing the information. The information to be disclosed may include, among other things, cost information, asset valuations and non-financial performance measures.

The regulatory financial statements include reports for each of four Services Groups specified by the Commission which define Telecom's business activities: - The Access Services Group includes the activities of Chorus. - The Wholesale Services Group includes the activities and services provided by Telecom on a wholesale basis but excludes international services. - The Retail Services Group includes the activities of Telecom Retail and Gen-I, including all of Telecom's mobile services. - The Other Services Group includes the activities of the international business group and overseas operations, including AAPT.

The Commission's initial regulatory reporting requirements were issued on 25 March 2009 following consultations with Telecom and other interested parties in 2008 and 2009.

Telecom published its regulatory financial statements and regulatory reporting manual on 18 December 2009. These are available on Telecom's website www.telecom.co.nz

The Commission published its summary and analysis report of Telecom's 2009 regulatory financial statements on 15 April 2010.

Media contact:

Felicity Connell, Senior Communications Adviser Phone work (04) 924 3709, mobile 021 225 4454

Commission media releases can be viewed at www.comcom.govt.nz End CA:00195000 For:TEL Type:COMCOM Time:2010-05-18:08:53:42

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