Government not anti-Telecom

New Zealand's government isn't trying to undermine Telecom Corp. in measures such as bolstering rural broadband services, said Communications Minister Steven Joyce. 

Telecom stock sank 1.4% to $2.14 on the NZX today, the second day in a row it has fallen to an all-time low.

The government yesterday announced plans to rollout broadband services to rural areas while amending the way Telecom is compensated for maintaining uneconomic lines.

The phone company said the changes will slash earnings by $168 million over three years. Joyce said his relationship with Telecom is "on the whole good.

There are things they would prefer we didn't do - this is an example."

The government "isn't trying to head down an anti-Telecom path," he said. "We're just trying to get the best broadband."

Yesterday's announcements reiterated proposals announced last year and "the market had fairly fully factored in this change when it was first announced," Joyce said, adding that the weakening share price is a reaction to other, more recent events.

Telecom's year has started badly, with repeated outages on its new XT network, spurring some customers to switch providers and damaging its brand.

The company has already been forced into an operational split as part of efforts to bolster competition, and the costs of compliance have contributed to an erosion of earnings.

Like incumbent phone companies around the world, it has also had to adjust to the consumer trend away from fixed-line phones, Telecom's core business, to mobile, where the carrier competes with Vodafone and 2degrees.

Shares of Telecom are rated ‘hold,' based on the consensus of 13 recommendations compiled by Reuters.

Three analysts have an ‘underperform' rating.Under the government's $300 million rural broadband plan, it will contribute $48 million, with the remaining $252 million from the Telecommunications Development Levy, which replaces the Telecommunications Service Obligations, at a rate of $42 million a year for six years.

Farmers have already given the government two cheers for its efforts to improve rural phone services, which are a key business tool for farms that bank and trade online.

"This is progress in the right direction, but it's just the first step," said Federated Farmers chief executive Conor English.

"Federated Farmers is not talking baby steps but wants radical change. It's the ability to harness things like 3D and other leading edge technologies and this demands ultra fast speeds."  

English, the younger brother of Finance Minister Bill English, urged the government to increase the package to $500 million.

Businesswire.co.nz

Comments from our readers

No comments yet

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