24 May 2010

Telecom considering retail and network split

10:35 pm on 24 May 2010

Telecom is considering separating its retail and network operations so it can take part in a Government roll-out of ultra fast broadband throughout New Zealand, but wants a reduction in red tape in return.

At present, under the Government's rules, Telecom is unlikely to have a major presence in the network rollout in which the Crown will invest $1.5 billion.

Telecom says the Government's initiative will fundamentally reshape the industry and it is worth fully considering a split, after initially saying it would not do so.

The Government has held firm on limiting Telecom's involvement in the fibre network plan because of the phone company's retail presence.

Telecom has conceded it must consider separation if it wants to be a major player in the future direction of the industry, but insists this is only an option at this stage.

Telecom wants the Government to free it from some regulatory commitments and is seeking changes to undertakings it agreed to in 2008 covering its copper-based network to recognise that future telecommunications networks will be fibre, not copper.

Analysts say the Government is not keen to buy Telecom's network business unit Chorus and separating the retail and network arms is the best option.

Telecom shares were 4 cents lower at $1.96 a share by the close of trade on Monday, but did fall as low as $1.92 at one stage.

Changes to services 'unlikely'

Consumers are unlikely to see any changes to phone services, despite Telecom's announcement it is considering splitting up the company into separate businesses.

Rosalie Nelson, an analyst with research company IDC, says the new broadband network will not come on-stream for years and any changes to Telecom, while significant, will not affect customers in the short term.

Ms Nelson says Telecom's announcement is part of a fundamental restructuring of the telecommunications industry and the full implications are still unclear.