KEY POINTS:
Telecom has endured a year in which it was split in three, its share price collapsed and it shunned an approach to buy its troubled Australian operation AAPT. John Drinnan talks to chief executive Paul Reynolds about what lies ahead.
It's been nine months since you signed new obligations for the Labour Government's shake-up of Telecom. But within six months you publicly complained the rules were too tough. Is the company backing away from its new obligations?
There were 74 obligations that Telecom has met and I don't take issue with any of them. But behind them is a huge investment and all companies have to make a good return. My point was not against regulation but against the after-the-fact Commerce Commission pricing decisions or the threat of them - threats that make investments unprofitable and unsustainable.
Isn't that oversight just the nature of the new regulated telco world?
Part of the problem is that we do not have a means to challenge these decisions. Around the world there is a merits-based review process - but uniquely that option is not open to us in New Zealand.
You got on well with Labour's Communications Minister David Cunliffe, but Telecom appears to have an even better relationship with National. Its plans for a taxpayer-backed fibre-optic rollout would be good for Telecom.
The new Government has been very interested to hear our views - on investment and on the overall structure of the industry. My sense is that they have a good business sense about what it takes to have a sustainable telecommunications industry.There have been rumours in the market that you were surprised to learn the problems facing Telecom and considered throwing in the job. Leaving never crossed my mind - not for a moment. I was recruited to address the regulatory challenges.
What about the issue of value. The share price for Telecom has collapsed faster than other companies on NZX.
We have been affected by the global economic turmoil, the recession as well as all the issues facing Telecom. We have had more issues than just about any company.
What are the opportunities in Australia? The Rudd government has banned Telstra from developing the next generation network.
There appears to have been a big falling out between Telstra and the Australian Government over fibre optics to the home. To me it just illustrates the way that they are just starting this development while we are ahead.
Asian telco Pacnet has indicated interest in Telecom's troubled Australian operation AAPT but you say it is not for sale.
We turned AAPT around in 2008 - from losing cash to breaking even - and it will be generating cash in 2009. We have taken the medicine and we are re-entering the market with advertising and promotions. AAPT has become an attractive asset. Because of that there has been a lot of interest in it - but then why would we sell it?
But you have entertained offers?
When people come across for bids what do you say? No responsible board of directors can refuse to listen to proposals - but we do not have a "for sale" ticket on AAPT.
Marketing at Telecom has been a problem hasn't it?
There is more and more competition and we have put extra effort in. Marketing is already improving but we will see a significant step upwards in 2009. We are no longer the only voice.
How much of your plans to renew growth are built on the notion of increased retail sales? And are those growth plans hampered by the economic downturn reducing the amount that people spend?
Our business is more diverse than it was in 2007 and 2006. Retail is still our biggest part of the business but it is being challenged by our business-based ICT operation, wholesale and Chorus divisions.
