Telecom financial statements ‘unreliable for regulatory requirements’

Tuesday 3rd May 2011 1 Comment

The Commerce Commission has published a summary and analysis of Telecom's regulatory financial statements for the year ending June 30, 2010, saying they are "unreliable for regulatory requirements."

The Commission considers Telecom's valuation of key assets is overstated, and in particular, that Telecom's access network is overvalued by more than a billion dollars.

"In valuing its assets, Telecom is required to use processes which are objectively justifiable and reasonable," said Telecommunications Commissioner Dr Ross Patterson.

"However, Telecom has not satisfied the Commission that its 2009/10 trenching discount factors are objectively justifiable and, in particular, that they reflect economies of scale. As a consequence, a number of costs, including the cost of providing rural phone lines - for which Telecom has reported a loss - are likely to be substantially overstated."

As part of the Telecommunications Act 2001 Telecom is required to publish financial statements and other information about its network, wholesale and retail business activities and services in a form determined by the Commission. These statements should provide useful information to the telecommunications industry about the operation and behavior of Telecom.

The Commission proposes to consult on a range of changes to the requirements for 2010/11 and on whether Telecom should be required to re-publish its 2009/10 regulatory financial statements to address this overestimation issue.

Comments from our readers

On 3 May 2011 at 8:15 pm BRIAN said:

As a long term shareholder who has lived through the destruction of TELECOM's asset value by the pretender to the Labour throne (remember $9.30 value), I consider that this latest attack on the share value by Petterson et al as being beyond the pale. We need a Royal Commission to look at the basis of decisions made by Ministers so that our investments get their real value.