1 Sep 2011

More details on Telecom seperation plans still needed

6:53 am on 1 September 2011

Analysts are awaiting more information about Telecom's separation plans, after it confirmed the departure of chief executive Paul Reynolds next year and further details on the split.

Dr Reynolds will lead the company through its separation into network and retail firms, called New Chorus and New Telecom respectively, in November and quit in June next year.

Chairman Wayne Boyd will also step down if shareholders agree to the split.

Based on last year's earnings, New Telecom is the bigger business, with gross earnings of $1.1 billion, nearly double New Chorus's $676 million.

But IDC research director Rosalie Nelson says there are some real challenges for the retail arm, despite having two-thirds of the fixed line phone market, half of the broadband market, and about 45% of the mobile phone market.

She says it's expected New Telecom will have a laser sharp focus on cost and look at exiting markets and services.

Ms Nelson says it may become a smaller business, but it will be focusing on profitability.

Lot like Vodafone in future

She says New Telecom will look at a lot more like Vodafone because it will be an internet service provider wholesaling services from Chorus, but it will still own, control and fully manage its mobile network.

Ms Nelson says Telecom also provided costs on delivering ultra fast broadband from the road to the home of up to $1100, raising questions about how much people are willing to pay for that cost to be recouped.

She says it will be interesting to hear from Chorus and Crown Fibre Holdings on exactly where they see the demand for fibre emerging.