Telecom NZ, Enable Networks secure remainder of UFB contracts; Telecom must spin off network arm to proceed

24 May 2011

Crown Fibre Holdings (CFH), the government agency charged with managing New Zealand’s Ultra Fast Broadband (UFB) network – which seeks to extend high speed fibre-based internet to at least 75% of the country’s population through a new fibre-optic network – has confirmed that it has allocated the remainder of the country’s geographical regions to Telecom New Zealand and Enable Networks. Telecom – through its network arm Chorus – has been awarded contracts covering 24 urban areas (including Auckland and Wellington), whilst Enable Networks, a fibre company wholly owned by Christchurch City Holdings Limited, will cover Christchurch, Rolleston and Raniora.

The announcement means that tenders in all 33 UFB candidate areas have now been fulfilled by CFH, with approximately 69.4% of the contracts awarded to Telecom’s Chorus unit; the remaining 30.6% have been dispersed to Enable, alongside CFH’s existing partners, WEL Networks (also known as the Central North Island Fibre Consortium and Ultra Fast Fibre) and Northpower Limited, for the areas of Hamilton, Tauranga, New Plymouth, Wanganui, Hawera and Tokoroa (WEL) and Whangarei (Northpower).

As part of the agreement Telecom New Zealand has agreed to structurally separate its infrastructure business unit, Chorus, from the rest of the company. Going forward, Chorus will operate as a nationwide fixed line access network operator, offering services on an ‘open access’ basis, whilst ‘Telecom’ will function as a retail-focused telecoms business, comprising fixed, mobile and ICT businesses. Pending certain conditions, including stakeholder approvals and legislative change, Telecom has confirmed that it aims to demerge Chorus by the end of the calendar year.

CFH chairman Simon Allen commented: ‘These are strong commercial agreements which met the Crown’s key criteria. Partners such as Chorus and Enable Networks offer significant industry experience, financial strength and the ability to complete the UFB deployment within the government’s allocated budget and timeframe. Attractive wholesale UFB prices will help end users migrate onto the UFB to experience much higher bandwidth and new services that will follow. Collectively, we have made the best possible use of the government’s funds in striking these agreements, using the Public Private Partnership model to leverage around NZD1.3 billion of investment to ensure the deployment of UFB to 75% of New Zealand’s population. The total cost including private sector co-investment is likely to be in excess of NZD3 billion. UFB will drive real change for New Zealanders, especially in the priority segments –businesses, schools and the health sector. We see enabling improved productivity, innovation and new services in these areas as perhaps the most critical benefits of UFB. CFH is also very encouraged that Christchurch City Holdings and Chorus have agreed in good faith to work in towards developing a partnership to bring their combined existing fibre networks and expertise to focus on the reconstruction and development of Christchurch. This has been a long, tough and highly competitive process and we thank all the bidding parties, successful and unsuccessful, for their efforts. Full scale deployment of UFB is already underway in Whangarei and will commence shortly in Hamilton, Tauranga and Wanganui. Enable will commence UFB deployment in July 2011 and Chorus in August this year. We anticipate the first UFB customer connections in the next couple of months’.

New Zealand, Chorus (New Zealand), Spark, Spark New Zealand Group