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Enough is enough - Alcatel-Lucent on notice over XT outages: Reynolds:

Tuesday 23rd February 2010

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Telecom chief executive Paul Reynolds is putting XT architect Alcatel-Lucent NZ on a very short leash, saying “enough is enough” over the spate of outages on its network. The shares sank 2.5% to an 11-month low of $2.30 today, 10 cents shy of the all-time low it hit in November 2008.

Reynolds promised compensation of around $10 million for customers over the three months from March, on top of a $5 million compensation package relating to earlier outages.  

He told a media briefing in Auckland that Telecom hadn’t “lived up to the promises we made about XT when the network was launched,” and vowed Telecom will take a bigger role in the day-to-day operation and management of XT. 

“The CEO and the entire executive team (of Alcatel-Lucent) are really involved – this is the single biggest operational matter in Alacatel worldwide,” Reynolds said. “There’s no specific deadline (to getting the network meeting customers’ expectations) but it’s clearly very urgent.” 

About 220,000 XT customers were affected last night by the fourth outage on the XT network south of Taupo in three months, prompting Reynolds to call a crisis meeting this meeting and front a media conference this afternoon.

He confirmed chief transformation officer Frank Mount resigned over the network failures.  

The compensation deal would put the phone company’s full-year guidance on adjusted net earnings to the bottom of the range of between $400 million and $440 million.  

Chief information officer David Havercroft will take on the responsibility for all network and IT operations immediately, while chief financial officer Russ Houlden will take on duties for the shared services operations and technology strategy. 

Reynolds said he didn’t think there would be anymore resignations over the outages, despite speculation among analysts that both board and other senior management positions could be at stake.   

Telecom will negotiate the termination of contracts on a case-by-case basis, but Reynolds said he hoped customers would be swayed into staying by the three month loyalty credit. 

Affected post-paid customers will receive a third off their monthly plan charge, including texting and mobile broadband plans, while pre-paid customers south of Taupo will receive a 33% bonus every time they top up during this period.  

SME customers and Gen-i enterprise and corporate clients will have 50% of their monthly plan charges credited over the next three months. 

Reynolds confirmed Alcatel-Lucent’s competitors had contacted them, and while he will talk to them, he said his primary focus is on getting the network working successfully.

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