Richard Inder: It's right to call time on Telecom's tactics

Time called

Telecommunications Commissioner Douglas Webb yesterday called Telecom's bluff.

New Zealand's largest listed company has always washed its hands of the debate over regulation.

It claimed it delivered on its obligations. It was the Government's duty to set the rules and, as a result, consumers should have expected no more or less than the rules specified.

But it was a cute position.

Any proposal to tighten the regulatory regime was bitterly opposed by the company.

It would claim changes to the regime would load extra costs on telecommunications users; capital markets would find the change unsettling and this, combined with a less benign regime, would discourage investment.

Meanwhile, the company would declare - backed up by stacks of reports from so-called independent consultants - that New Zealand's telecommunications regime was the best in the world; that investment in the network was on a par with the world's best practice, as was the country's infrastructure and services.

These protests betrayed a degree of satisfaction with the existing set-up.

Webb, however, yesterday exploited major holes in Telecom's armour.

First, the uptake of high-speed internet in New Zealand is on the bottom rungs of the OECD ladder and is difficult to hide.

Secondly, Telecom's Australian subsidiary, AAPT, has argued for a more level playing field in Australia, a market where the incumbent Telstra suffers under a much harsher regime than the one on this side of the Tasman.

Citing these facts, Webb called for an end to Telecom's feints.

And, no doubt emboldened by debates over telecoms regulation in Britain and Australia, has threatened serious regulation if Telecom refuses to separate the company's wholesale business from its network operation.

His approach is the right one.

Telecom, by instituting such a change itself, avoids all the unintended consequences of regulation. Price controls set a floor under prices and can limit innovation.

The approach has also delivered overseas.

Britain's incumbent BT Group only last week agreed to such a separation, avoiding a break-up into two separate companies. Meanwhile, Australian regulators seem to be heading down a similar track.

Get Carter

Another day, another company begins the slow drift from the stock exchange.

The surprise candidate was forestry giant Carter Holt Harvey, the NZX's fourth-biggest entity. But lines company Vector yesterday also launched its long-anticipated takeover offer for market heavyweight NGC.

Together, the companies have a market value of $4.5 billion, or almost 10 per cent of the NZSX-50.

The pain that comes with the departure of NGC is partly offset by the listing of Vector, which according to yesterday's prospectus will have a $2.38 billion market value if it gets full control of the gas firm.

The sale or break-up of CHH, which the market regards as the most likely result of International Paper's decision to examine the sale of part or all of its cornerstone stake, is a loss of a different order.

The forestry company has never been a strong performer, losing millions in its recent history.

But it has been "our" poor performer. It has provided the daily share turnover and corporate deal-making that has helped to support the necessary infrastructure for a vibrant capital market.

Long-dissatisfied shareholders may welcome the end to their misery, but the other costs of its loss should not be underestimated.