GENERAL: TEL: Telecom Delivers on Fibre

2 Aug 2010 3:23 pm

TEL 02/08/2010 GENERAL

REL: 1523 HRS Telecom Corporation of New Zealand Limited (NS)

GENERAL: TEL: Telecom Delivers on Fibre

2 August, 2010

MEDIA RELEASE

Telecom delivers on fibre

Telecom has today submitted an extensive refined proposal to Crown Fibre Holdings, reinforcing its commitment to partnering with the government through CFH to deliver a national fibre to the home network that is both economically and physically enduring.

The bid outlines Telecom's wide-ranging solution to meet the vision of fibre to the home available to 75% of New Zealanders by 2019, with priority users reached by 2015. The details of Telecom's bid are confidential, in line with Crown Fibre Holdings' process.

"Telecom has a critical role to play in ensuring the fibre vision is a success," said Paul Reynolds, CEO, Telecom.

"I firmly believe that Telecom, through Chorus, can deliver more fibre, faster and more efficiently than any other partner while avoiding duplication or waste. Our solution brings together the best of both worlds - the economies of scale and consistency of service inherent in a single, national, open access network, and the potential for significant local community involvement.

"It was essential that our proposal aligned the interests and incentives of Telecom, its shareholders, the Government and New Zealanders, and I believe we have delivered that."

Dr Reynolds said that the development of the refined proposal had been an enormous and intensive piece of work.

"Our proposal is predicated on the structural separation of Telecom, through a demerger into two companies which would give rise to Chorus2 as a new and entirely standalone company. This would be a significant event for our company and would radically transform the telecommunications sector in New Zealand. A significant structural change to Telecom's business would require 75% of the shares that are voted to vote in favour of the demerger proposal.

"We have had more than 100 of Telecom's senior and most experienced people, including three members of my executive team, working full time on the refined proposal for CFH and simultaneously developing a detailed roadmap of the steps necessary for a demerger to occur, such is its importance to Telecom, its shareholders, and New Zealand as a whole.

"No sacred cows have been spared and no assumptions have been left unchecked as we have worked through this stage of what is a challenging but critically important issue."

"We have also proposed integrating the Ultra-fast Broadband initiative with the Rural Broadband Initiative. Integrating the two initiatives would allow for the extension of the reach of Ultra-fast Broadband into rural areas well beyond the 75% coverage area. The economies of scale that can be achieved through our proposal and utilising existing assets will mean rural New Zealand can more quickly get the benefit that fibre is set to bring. We have long held the view that the rural sector has both the need and the applications available to be able to take advantage of the benefits of fibre based telecommunications and we have been mindful of this as we developed our proposal.

" Telecom has been open, flexible and considered all avenues in detail when developing the refined proposal," Dr Reynolds said. "We look forward to discussing all aspects of our refined proposal with Crown Fibre Holdings and other relevant government bodies."

Telecom media relations contacts:

Mark Watts 0272 504 018

Ian Bonnar 027 215 7564 End CA:00197916 For:TEL Type:GENERAL Time:2010-08-02:15:23:13

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