Telcos pitch together for rural services

Spark central Auckland. Photo / File

New Zealand's three mobile operators - Spark New Zealand, Vodafone New Zealand and Two Degrees Mobile - are pooling their resources in a joint bid to win the government's extension to the rural broadband initiative in what they say is the most cost-effective way of expanding telecommunications services to almost all of the country.

The three carriers will inject an additional $75 million in equal shares if they're successful in winning the government's $150m funding for RBI extension and mobile black spot fund and expect to spend hundreds of millions of dollars more operating the infrastructure. The proposal would see an extra 500 new cell sites delivering a 25 per cent increase in land coverage across New Zealand to meet the Crown's goal of ensuring 99 per cent of the population has access to internet speeds of at least 50 megabits per second by 2025, with remainder getting at least 10 Mbps.

Vodafone chief executive Russell Stanners, who was the architect of a joint bid with Telecom (now Spark) in the original $285m RBI programme, said the partnership of the three mobile carriers was the "most cost-effective solution" that ticked off the government's needs, and would effectively create a shared wholesale wireless network that all internet service providers to sell services to rural customers.

"This is hugely exciting - the two largest contributors to the economy are agriculture and tourism - both are rural based businesses to a large degree," Stanners told BusinessDesk. "They benefit off this proposal."

The collaboration comes at a time when Spark and Vodafone are going head-to-head in the battle for control of NZX-listed telecommunications minnow TeamTalk. Spark mounted a hostile takeover bid at what TeamTalk described as an "opportunistic" bid and significantly below the firm's independent adviser's valuation. Vodafone later came in and bought a controlling stake in TeamTalk's Farmside rural ISP business at a premium to the valuation and stipulated that it could mop up the remaining shares if a rival firm took control of TeamTalk.

The mobile carriers anticipate their proposed extension to the RBI would add more than 1,200 kilometres of mobile coverage along state highways and provide thousands of households and firms access to better internet services.

Last month industry group the New Zealand Telecommunications Forum called for the staggered removal of the telecommunications development levy, which replaced Telecom's old Kiwishare obligation to provide services to uneconomic areas, and has been the government's mechanism to pay for the RBI and other public good initiatives.

Separately, network operator Chorus said it had submitted a variety of proposals to Crown Fibre Holdings to participate in the RBI and mobile black spot tenders, and chief executive Kate McKenzie said the company would work with other industry participants to get the most out of the sector's investment.

"In areas that are inherently economically challenging to reach, it's important that subsidies go towards providing as many new people as possible with enhanced broadband services, rather than duplicating and overbuilding already existing high speed broadband services," she said.