Telecom talks structural separation in broadband bid

24 May 2010

Telecom Corp of New Zealand has said it is investigating structural separation, possibly spinning off its network company Chorus, so it can participate in the government’s NZD3 billion (USD2 billion) Ultra Fast Broadband Initiative. The Kiwi government has said telecoms retailers that also operate networks, such as Telecom, will not be allowed to participate in the planned public-private national fibre-optic network. Telecom is worried that if it does not get involved in the new broadband network it may be left behind other possible ultra fast network providers such as Vector and Canada’s Axia NetMedia Corp. However, Telecom’s participation in the new network could see it worth more than half the company’s current value. In an interview with Dow Jones Newswires, chief executive Paul Reynolds said Telecom was very keen to take part in the ultra fast broadband network and this meant structural separation had to be an option. ‘We are looking at it amongst other options, precisely what shape it would take, what the work up structures would be, what assets would be included, what products; are all the things that are under internal discussion and indeed are being discussed,’ he added. Telecom could make a final decision about separation around the time the government announces details of the ultra fast network roll out, probably after September.

Telecom is already in the process of building a NZD1.3 billion fibre-to-the-street broadband network that it has estimated will be accessible to 84% of the population in less than two years. The network, which Telecom has confirmed will still be completed, will not deliver speeds as fast as the planned ultra fast fibre network into which the government will inject NZD1.5 billion, to be matched by private sector investment.

New Zealand, Spark New Zealand Group