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Telstra chairman says Telecom in for pain


Thursday 24th October 2002

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Telstra Corp chairman Bob Mansfield says Telecom New Zealand is in for a painful learning period if it refuses to open its arms to competition.

Telstra, which owns 58.4 percent of TelstraClear, had experienced the pains of having its Australian telecommunications monopoly shattered and Mr Mansfield told the Wellington Chamber of Commerce today that New Zealand should learn from Australia's reforms.

He said the binding codes agreed to by telcos operating in Australia should be applied in New Zealand rather than wait for the Telecommunications Commissioner to come up with a code.

"Why take longer to improve things in New Zealand when we've done things in Australia."

Telecom would do better to change its approach and actively sell access to its network, as Telstra does in Australia, rather than behaving protectively and delaying competition, he said.

"The benefits would be to the customer and the consistency within the industry would force (telcos) to compete with each other, not hide behind red tape or argue who was here first."

Telecom's estimate that it is paying $425 million per year to maintain the existing network -- its Telecommunication Service Obligations (TSO) -- showed it had not yet come to terms with market realities.

The estimated cost of TSO, which includes non-profitable customers in remote rural areas and heavy Internet users, was more than double that of the previous year.

Telstra would have to front up with $46 million to subsidise Telecom for the loss, based on its 11 percent market share.

The estimate represented 12 percent of Telecom's revenue, compared to the world benchmark TSO of 1 percent, Mr Mansfield said.

Telstra had also made extravagant TSO claims in the past, as the monopoly telco in Australia.

"When Telstra first made its claim in Australia it was $1.7 billion and we ended up with around $211 million," he said.

"So the incumbent previous monopoly telco starting off with an annual claim way out of the realm of reality is something that we've been through ourselves."

The Telecommunications Commission, which finally determines the TSO subsidy formula, last month asked Telecom to review the estimate.

Telecom has an extension until November 8 to come back with a revised figure.

On other matters, Mr Mansfield said Telstra's New Zealand dollar commercial issue paper programme had been launched on Monday and was going well.

It would be used in part to fund TelstraClear, which recently refinanced its $600 million debt owed to Telstra.

Mr Mansfield said Telstra was "patiently aggressive" about the performance of the New Zealand company and wanted it to be profitable by November 2004.

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