Telecom to voluntarily split in two

By Catherine Harris

Telecom said today its decision to split its business and put rivals on the same footing as its own retail business had not been forced by the Government.

"This is a significant change and we were already starting to move in this direction," chief executive Theresa Gattung told journalists today.

Telecom accepted the Government wanted more competition in the telecommunications industry and was "getting on with it", she said.

On May 3, the Government announced it was forcing Telecom to open its network to broadband rivals and said it was considering a forced split of the company. Since then, more than $3 billion has been wiped off Telecom's value.

The company will split its retail and wholesale businesses, putting its own retail unit on the same level as other competitors.

Ms Gattung said Telecom had presented its wholesale plans to the Telecommunications Commissioner last November and Telecommunication Minister David Cunliffe last December.

Telecom said it began consulting with its wholesale customers in February, and announced its implementation in April "all ahead of May".

However, firm plans for the split had not begun until the Government announced it was forcing Telecom to open up its "copper wire" network to rivals.

Asked whether the Goverment would be placated by the move, chairman Wayne Boyd said the company was "reading the tealeaves".

Mr Cunliffe cautiously welcomed today's announcement saying "on the face of it this looks to be a positive development".

In Britain, the move lead to lower prices and greater demand for faster internet technology like broadband.

Ms Gattung was circumspect about the prospect of lower prices for consumers.

"Us embracing this regime makes it more likely that there will be more competition more quickly. The working hypothesis is more competition leads to better outcomes for consumers."

It was Telecom's intention to hold 100 per cent of its wholesale operation because it would become a significant contributor to overall revenue.

It was unclear how long the new set-up would take to put in place. Ms Gatting said Telecom would immediately begin consulting with the industry "to put flesh on the bones".

It would also set up a monitoring body which would include people outside Telecom.

Asked whether others in the industry would believe Telecom's new willingness to talk, Ms Gattung said it was a major change and aimed to be transparent.

To speculation that Ms Gattung's job was under threat, Mr Boyd said she had the board's full backing for the move.

"It is a significant strategy, it is transformational and she has our full support."

Telecom's shares were unchanged on $4.10 in late trading.

- NZPA

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