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Telecom says it is happy with the details of a Government plan to split the company in three. Senior Telecom executive Mark Ratcliffe said he hoped the proposal signalled "a new dawn" in the company's relationship with the Government.
Communications Minister David Cunliffe yesterday announced the final details
for the split of Telecom into three operationally separate divisions - a network unit, a wholesale unit and a retail unit.
The plan is part of sweeping Government reforms to the telecommunications sector aimed at introducing greater competition and a wider range services into the market.
Ratcliffe - Telecom's chief operating officer technology and enterprises - said despite a demanding and comprehensive timetable the operational separation proposed by the minister was workable and allayed many of Telecom's original concerns.
"From our point of view it's a new form of legislation ... and new framework to work within, but we'll be focusing on getting on and doing stuff for customers."
Ratcliffe said the cost of complying with the operational separation would still be in line with figures released at its annual result in August - $200 million in capital expenditure over the next four years plus operational costs of up to $40 million a year for the same period.
"We will have a clearer view on this capital and operational spending when the final details of operational separation have been settled later this year," said Ratcliffe.
Communications Minister David Cunliffe said the Government had benefited from having regular discussions with Telecom's incoming chief executive, Paul Reynolds.
Reynolds has first-hand experience of the implementation of operation separation from his stint as head of British Telecom's wholesale division.
"This is a robust determination," said Cunliffe. "It gives effect to the requirements set out in the [Telecommunications Amendment] act and adds some more.
"It also seeks win-wins where they are available and has the support of Telecom."
The market reacted positively to the news adding 14c to Telecom's share price before it closed at $4.44.
Although the company is required by law to undertake operational separation, there is a possibility it could proceed with a form of structural separation, but contrary to speculation there had been absolutely no deal to that effect, said Cunliffe.
Ratcliffe also denied speculation the company had been in discussions with the Government regarding the sell-off of its access unit.
"I've been heavily involved in this over the last three months or so and we've had no discussions with anybody as far as I know," said Ratcliffe. "We haven't been involved in any discussions with anybody on structural separation."
He admitted that while it wasn't part of the company's current thinking, "Never say never.
"That is something I'm sure the board will look at from time to time as it does with all the assets in the Telecom group," said Ratcliffe.
"I think one of the things that is a great determinant of whether you could do that is the pricing the Commerce Commission decides on for their local loop unbundling service ... any potential purchaser of that business would look very clinically at that price to see whether there was a stable business."
PROPOSAL FOR OPERATIONAL SEPARATION
* Telecom is to be operationally separated into three business units - a fixed network division, wholesale division and a retail division.
* Telecom is required to have key organisational changes in place before the end of March next year and has four years to complete the separation.
* Telecom must provide services to its competitors and its own business on the same commercial terms.
* An independent oversight group will act as a high-level watchdog within Telecom.
RIVALS GIVE SPLIT THUMBS-UP
The final shape of Telecom's split into three separate divisions is supported by the wider telecommunications industry.
Graham Walmsley, head of wholesale at CallPlus, said it was pleasing to see the minister sticking to the regulatory milestones.
"We need to get delivery of services and operational separation can't be used as an excuse to delay," he said.
However Walmsley said the heavy financial penalties - a breach of the final separation undertaking could result in a penalty of up to $10 million, plus $500,000 a day for continuing breaches - might see Telecom keeping to the timetable to the detriment of local loop unbundling (LLU) and unbundled bitstream access (UBS).
"We need to make sure their feet are held to the fire in terms of the LLU."
TelstraClear's manager of regulatory access, Wendy Dodd, said the company would be looking for assurances that equivalence of network services would be introduced from day one.
"We understand it's going to take Telecom some time to change its systems and we're not seeking to impose unnecessary costs on them, but what we do want to see is equivalence and transparency," said Dodd.
The general manager of corporate affairs at Vodafone, Tom Chignell, said the sooner uncertainty was eliminated the better, for the industry and therefore for customers.
