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Telecom mulls structural separation, looks to shift some burden back to govt

Monday 24th May 2010

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Telecom is considering splitting off its network division to grab a share of the government’s $1.5 billion roll-out a nationwide fibre network, and has asked to shift some of its regulatory burdens on to the ultra-fast broadband initiative.  

Chief executive Paul Reynolds said Telecom is making a “thorough assessment of structural separation” to tap the government’s broadband initiative, and is looking to shed some of the undertakings required under its operational separation that it doesn’t believe are “relevant in a fibre future.”

The shares sank 1% to $1.97, a new low since the early 1990s and making it one of three stocks to fall on the NZX 50 in trading today.  

The phone company has asked Communications Minister Steven Joyce to suspend the forced bulk migration of existing broadband customers on to new copper-based services, cut its requirement to migrate 17,000 customers on to a new Voice over Internet Protocol copper service by the end of the year, and remove the condition for Telecom to build a new set of wholesale systems that aren’t consistent with the industry structure implied by the government’s broadband initiative.  

The undertakings “lock Telecom, the industry and the government into some choices which should be considered as part of the UFB initiative and the potential structural separation of Telecom,” Reynolds said in a statement. “The government’s UFB initiative will fundamentally reshape the structure of the entire telecommunications industry in New Zealand and Telecom is therefore undertaking a thorough assessment of the merits of structural separation.”  

Telecom has upped the ante of its pitch to be involved in the government’s proposed fibre roll-out after initially saying it wouldn’t budge on structural separation.

Since then, a series of pitfalls with its new XT network has kept the second largest company on the NZX in the headlines for the wrong reasons, and the emergence of rival Vodafone New Zealand as the partner in the only other national tender has put pressure on Telecom to win at least some of the contract.  

CEO Reynolds has stressed the importance of getting a share of the government’s pie, saying the company has to shift to a fibre world as its copper network nears the end of its life.

Chorus, its network division that could be carved out of the business, has rolled out more than 23,500 kilometres of fibre around the country, and recently hit the half-way point in its government-mandated cabinetisation process, which aims to give 80% of New Zealanders access to internet speeds of up to 20 megabits a second by the end of next year.  

Last week, the Commerce Commission highlighted the lack of investment in broadband infrastructure outside Auckland as a hindrance to New Zealand’s high-speed internet.  


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