25 Feb 2010

Reluctance to invest in new phone company understandable - PM

8:47 pm on 25 February 2010

Prime Minister John Key says he can understand why Maori groups were reluctant to invest more money in the new mobile phone company, 2Degrees.

A capital-raising last year by Te Huarahi Tika Maori spectrum trust failed to find new investors, resulting in a dilution of the Maori stake in the company, which uses frequencies gained through Treaty claims.

Mr Key says Telecom's problems with its new XT network highlights the risk of investing in telecommunications.

He says 2Degrees appears to be doing well with international investors who have deep pockets and know what they are doing.

Two Degrees chief executive Eric Hertz says many countries of comparable size or smaller have multiple networks, including Sweden, Switzerland, Ireland and Iceland.

He told Waatea News the Goverment needs to create conditions for fair competition by driving down interconnection costs to level the playing field.

The Government is currently considering its response to a Commerce Commission report that highlighted major barriers to new entrants in the mobile phone market.