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More details on Telecom split


Tuesday 26th July 2011

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The two entities resulting from the proposed structural separation of Telecom will use some of the same assets, but no assets will be jointly owned.

Telecom and the Ministry of Economic Development (MED) today published a range of documents with more information on the structure of the telecommunications industry under the proposal.

Subject to shareholder and bondholder approval, Telecom planned to separate networks arm Chorus into a stand-alone business, enabling the "New Chorus" to take part in the Government's ultra-fast broadband (UFB) initiative.

Documents released today include details of the Telecom assets and liabilities that will be transferred to New Chorus during the demerger, and the associated commercial sharing arrangements between New Telecom and New Chorus.

An asset allocation plan showed how more than 270,000 individual fixed assets would be split between the two companies.

Following the demerger, the key assets of New Chorus would include local access fibre, copper and physical infrastructure and buildings in this country, local access electronics and aggregation, and systems for managing wholesale service provider customers.

New Telecom's key assets would include service platforms for voice and data applications, the mobile network, the necessary national network with physical sites to accommodate service platforms and connect together to provide end to end services, sales and distribution channels and brand, and investment in overseas assets, and the 50 percent stake in the Southern Cross Cable.

The plan also outlined arrangements to exist between New Chorus and New Telecom where duplication of assets would mean additional cost and complexity, Telecom said.

While there will be no joint ownership of any assets, certain assets would be used by both entities. Those arrangements were designed as commercial arm’s length agreements and would be subject to oversight by the Commerce Commission.

"Sharing of some assets, under robust arm’s length agreements, is a pragmatic and sensible solution that ensures the industry continues to receive reliable services and avoids unnecessary duplication and waste," Chorus chief executive Mark Ratcliffe said.

The documents released today also included deeds of open access, which would replace Telecom's undertakings on operation separation on the day of demerger.

The purpose of the deeds was to ensure the principles of non-discrimination and equivalence that were put in place through operational separation were maintained by New Chorus.

"As structural separation marks a fundamental shift to the industry structure, the principles of a level playing field and non-discrimination and equivalence will shift to the newly-demerged Chorus business," Ratcliffe said.

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