Regulatory relief key to Telecom UFB package: Reynolds

Telecom's ultra-fast broadband proposal requires relief from regulations which it says stifle its competitivenss while failing to benefit consumers, chief executive Paul Reynolds says.

The company, today, released a revised offer to split itself in two so that it can participate in the $1.85 billion UFB initiative with Crown Fibre Holdings - the government entity handling the process.

Other bidders, including the New Zealand Regional Fibre Group and a consortium led by Vodafone and Canadian fibre provider AXIA, lodged their revised bids with CFH today, with the government due to pick one of more preferred partners by the end of October.

"It's a package," said Reynolds of the Telecom proposal. "You can reshape it, but essential elements such as the cost to build and a new regulatory framework - there have to be elements of those in whatever package is agreed.  We are open to discussion, but you can't just leave out any element."

Telecom is already seeking relief from regulations imposed mid-decade by the previous government.  While not all are relevant to the provision of UFB, Telecom says many have been overtaken by events and fail to serve their intended purpose while adding major costs to its business.

Assuming the government opted for Telecom in October, it could achieve the proposed structural separation, or demerger, requiring 75% shareholder approval, "on a tight timetable of completion by early next year," Reynolds said.  That would leave Telecom's Chorus arm as an open access national fibre provider, and the rest of the Telecom business to compete in voice, data and other telecommunications services.

"Participating and partnering in the form we have submitted today, there are more attractive outcomes for the company," he said.  "We are thinking in very wide-ranging terms, including the way those networks are priced versus existing networks, how the industry would be structured, and how the regulatory framework will evolve.

"All of those are part of the value equation.  We are effectively proposing the most profound restructuring of our company, a very detailed roadmap to achieve that, and a very detailed build plan."

Reynolds said Telecom had extensively modelled the implications both of inclusion and exclusion from the UFB initiative. Exclusion would leave Telecom to compete with its existing fibre and copper networks against the government-backed new fibre provider - a prospect feared by all participants in the sector because Telecom could undercut the new fibre network for years using its existing assets.

"They are trying to work out what the government wants," said Paul Harrison, who manages $330 million of equities at BT Funds Management. "They've gone from aggressively resisting to playing ball. Obviously the share price has been telling them the way shareholders are feeling about it."

"From out point of view it would be very difficult to make Crown Fibre work without Telecom. Crown Fibre needs customers - Telecom has customers," said Harrison.

Reynolds said New Zealand was heading towards a "world-first in policy terms," with similar debates occurring in many countries about how to accelerate UFB in partnerships between the private and public sectors.

Telecom is also proposing that the $350 million rural broadband initiative - currently on a separate track - be rolled into the wider UFB package, arguing in part that farmers will want the farm management gains available from UFB.

Businesswire.co.nz

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