3 May 2011

Telecom accused of inflating value of assets

3:13 pm on 3 May 2011

The Commerce Commission has accused Telecom of inflating the value of its assets and substantially overstating the cost of providing rural phone lines.

In a summary and analysis of Telecom's regulatory financial statements for the year to June 2010, the commission says the information is unreliable.

It concludes Telecom's valuation of key assets is overstated and its copper and fibre networks are overvalued by up to $1.3 billion.

The commission believes Telecom's trenching discount factors are too low and do not reflect the lower average price as the size of the job increases and therefore pushes up costs, including the cost of providing rural phone lines.

The Telecommunications Users Association says the commission should demand that Telecom repay the money it received from rival companies to supply phone services to rural regions.

Chief executive Paul Brislen says the findings are gravely concerning, given the regulatory holiday that Communications Minister Steven Joyce is granting firms to roll out ultra-fast broadband.

Telecom says valuation methods have an element of judgment and subjectivity.

The Commerce Commission is now considering making Telecom change its reporting requirements to provide more accurate information.

Under telecommunications legislation, Telecom is required to publish information about its network, wholesale and retail business activities.