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Vodafone wins TSO appeals - Telecom mulls Supreme Court options

Thursday 8th April 2010

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Telecom is mulling its options after the High Court ruled against it in two separate decisions over the fee it charges competitors to provide basic phone services to its remote customers.

The High Court ruled the Commerce Commission made errors of law involving $33.2 million of assessments of the cost of the Telecommunications Service Obligation, formerly known as the Kiwi Share Levy, in the 2004/05 and 2005/06 determinations. 

Those determinations cost Telecom’s main rival, Vodafone New Zealand, $16 million and $17.2 million respectively. 

Telecom group general counsel Tristan Gilbertson said the company was surprised by both rulings in the case, particularly “the judgement in favour of Vodafone’s appeal (which) appears to be inconsistent with the recent Court of Appeal decision in a related TSO case on efficient past investments. 

Gilberston says the company believes there may be “merit” in having all TSO issues heard together in the Supreme Court and is discussing it with other interested parties before proceeding.  

Vodafone NZ general manager of corporate affairs Tom Chignell welcomed the decision and said the regulator would now have to review its cost-modelling approach on not just these two determinations, but on all other TSO determinations also. Still, he said Vodafone would be “receptive” to reaching a commercial solution with Telecom and the commission.  

The TSO will undergo an overhaul from next year when the cost of providing essential phone services to non-commercially viable customers is opened up to competition. Telecom has had control of the 60,000 or so customers since it was privatised in the early 1990s.  

Shares in Telecom dropped 0.9% to $2.22 on the NZX today. The decisions coincide with quarterly institutional investor book-building that is credited with heavy Telecom trading volumes this week.

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