Limits to pouring cash into Clear says British owner

By RICHARD BRADDELL

WELLINGTON - Clear Communications' owner, British Telecom, says there is a limit to the cash it will pump into its New Zealand subsidiary. Long-term, that limit will be determined by the regulatory environment.

The British Telecom executive responsible for Clear, Ian McKenzie, said yesterday he has been visiting New Zealand every five to six weeks for operational reviews, although he was here this time to talk to the Government.

The two items on the agenda were the forthcoming inquiry into telecommunications instigated by Communications Minister Paul Swain and the 0867 residential internet access controversy.

Mr McKenzie said that while BT supported the public inquiry, it would have preferred a "quicker route" to be followed by the installation of a regulator.

BT was also pressing for unbundling of Telecom's local loop and would support institution of British-style regulation which he said provided a good model.

Meantime, he said, New Zealanders were paying "over the odds" for telecommunications, and that was not just a domestic issue because it made the country less competitive internationally.

The regulatory environment, such as it was, also discouraged foreign direct investment, he said.

Slating Telecom's imposition of 0867 as "very anticompetitive behaviour" that would not be tolerated anywhere else in the world, Mr McKenzie said Clear's internet growth had stalled at about 100,000 customers. Its market share, which used to be about half Telecom's, was slipping back.

Telecom said this week that its internet provider, Xtra, was regularly signing 9000 new customers a month and had passed 250,000 customers. It expected another 100,000 in the coming year.

Mr McKenzie said he hoped the Government would move quickly, but a report from a Commerce Commission inquiry, which was due around election time, had been successively put back and is now not expected to appear until next month.

The price BT paid for Clear has never been revealed, although combined with capital injections since, BT is believed to have spent more than $700 million.

Shortly after BT bought out the three other shareholders in 1998, it injected $170 million to pay off Clear's debt, followed by another $160 million at the end of last year to pay for network expansion.

Mr McKenzie said the $160 million would be released only as Clear's performance justified it. He was pleased to say Clear had met its business plan to date.

He rejected the view that the last capital injection was made to dress up Clear for sale, but reiterated that BT would not keep pouring money into an unprofitable investment.

Mr McKenzie would not be drawn on negotiations to sell Clear to Telstra, which are believed to have broken down due to disagreement on price.

He said BT was always looking for commercial relationships to improve Clear's business, but whether that would include the sale of a chunk of the company was another matter.

On BT's apparent deviation from a strategy of joint venture investments when it bought Clear outright, he said the strategy existed only because opportunities to take 100 per cent of a telco were so few.