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Telecom and Clear kiss and make up

By Ben Dutton

Tuesday 3rd October 2000

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In a deal that effectively ends years of litigation, Telecom and Clear Communications have agreed to a "Relationship Package" which the two telecommunications giants describe as a "comprehensive clean slate."

The "Relationship Package" as it has been coined is described as "a commercially pragmatic agreement between competitors who have decided to put their differences aside and to adopt a better working relationship." It is for a term of twelve months.

Major highlights of the package include an interconnection agreement that will see Clear paying Telecom $35 million over the next year; origination and termination by Telecom of 1,828 million minutes of long-distance calls by Clear customers; a data package giving Clear wholesale and resale access to Telecom's Jetstream service and a confidential settlement of ongoing litigation in which both parties will withdraw from the court proceedings currently between them.

Theresa Gattung, Telecom's CEO, said the approach to interconnection is innovative, setting a single price for a 12-month package of long-distance and mobile interconnection minutes.

The package also clears up the long-running 0867 number connection argument between the two companies. Clear had claimed that by implementing the 0867 number, Telecom had breached their 1996 interconnection agreement.

Clear's incoming CEO, Peter Kaliaropoulos said the 12 month term of the Relationship Package acknowledged the potential for change to the telecommunications environment as a result of the Ministerial Inquiry and left both parties free to negotiate more enduring agreements once the Inquiry's recommendations had been implemented.

Indeed, the timing of this announcement has not been lost on many industry watchers. The Ministerial Inquiry is due to report its findings tomorrow - and just how this new agreement between old rivals will affect the Inquiry's findings will remain to be seen.

Industry commentator Bruce Simpson, who publishes a daily "new economy" news and commentary website called Aardvark, said that the resolution of the outstanding issues was not unexpected in many quarters. "The telecommunications industry has become so competitive in some areas that I suspect both companies realise there's little value in wasting their resources on protracted legal battles," he said.

He also said that free ISP's would be affected by the package. "The fact that Clear won't be receiving payment for terminating Internet calls from the Telecom network must surely cast doubt on the continued viability of the future of those "free Internet" providers which are highly reliant on a share of those revenues."

Telecom's share price certainly wasn't buoyed by the news. The company was once again hit by a further wave of selling this morning, dropping at one stage to $5.70.



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