Telecom in limbo after UFB surprise

Telecom withdrew to its bunker this afternoon, cancelling media briefings with chief executive Paul Reynolds as it ponders its first round lock-out from the ultra-fast broadband roll-out today.

Crown Fibre Holdings, the government’s vehicle for the $1.8 billion “fibre-to-the-home” initiative, announced this morning it was prioritising negotiations with three locally-owned, regional fibre bidders in Timaru, the Waikato, and Whangarei.

Telecom shares sank 5.2% to $2.02 on the NZX in a decision that investors saw as bad for the company.  Time is now running out for Telecom to structurally separate by July next year, which it has offered to do in order to participate in the UFB project. 

"It takes away some of the optimistic scenario - the likelihood of a national outcome that was Telecom-centric," BT Funds' Paul Harrison says.

On the three regional proposals that are favoured: "two of the regions were quite small and they were probably going to do something like that anyway."
 
"Does this mean we're going to have a completely fragmented market where Telecom has to compete against small regional players with a lower cost of capital?"
 
He said the 5% drop in Telecom's share price was probably "a bit extreme" though the market had got ahead of itself in speculating that Telecom would be the central plank of the UFB rollout.

While the company remains on the CFH short-list, neither Telecom nor the government agency know when the next move on short-listing will come; with CFH indicating the ball was now in would-be partners’ court to improve their offers.

The process threatens to leave the beleaguered national telco and would-be national UFB solution provider “in limbo for anything up to a year,” one close observer said.

“You can’t state if there is going to be announcements made before October, or before Christmas,” CFH spokesman Paul Clearwater said.

CFH hopes to be signing agreements to proceed with the three prioritised bidders by the end of next month, to meet Communications Minister Steven Joyce’s political need for first earth to be turned on the UFB initiative before Christmas.

However, Telecom warned in a statement that if the government was serious about Telecom’s participation in the UFB initiative, it needed to know the regulatory, Rural Broadband Initiative, and legislative reforms that would also be required and which lie outside CFH’s mandate.

“Telecom’s proposal includes a potential structural separation by demerger in July next year.  Telecom will need appropriate engagement with the whole of government in order to meet this challenging timeframe,” said Reynolds in the written statement, which the company decided to make their only words on the matter today.

“Telecom remains open to partnership with other public and private sector owners of fibre assets, including the three parties prioritised for negotiation, where partnership can improve the overall economics of a national solution.”

The outcome was hailed by Vaughan Baker, the chief executive of the Regional Fibre Group, five of whose members – Alpine Energy, a Central Waikato consortium, and Northpower – now head into prioritised negotiation with CFH on the country’s first UFB roll-outs.

“It reinforces and justifies the regional approach,” he said. “I’m not anticipating too much of a lag between the first tranche (of prioritised bidders) and subsequent tranches.”

Businesswire.co.nz

Comments from our readers

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Printable version

Related News

Telecom NZ starts search for new boss
2degrees complains to regulator over Telecom 'sim-locking' plan
Chorus-free Telecom begins capital structure review
Telecom NZ's A3 credit rating affirmed by Moody's after split, outlook stable
Telecom NZ credit rating cut to A- by S&P on Chorus demerger
Telecom to offer iPhones direct to retail customers for first time this month
Telecom credit rating cut one notch to BBB+ by Fitch on demerger
Telecom shareholders overwhelmingly approve demerger
Telecom demerger vote expected this afternoon
Telecom continues whirlwind of settlements with incorrect broadband meter readings

Get quotes for Telecom Corporation of New Zealand Limit (TEL)

NZX Annoucements for TEL