Telecom pre-empts Government with split [audio report]

Theresa Gattung with Wayne Boyd at a briefing yesterday. Picture / Martin Sykes.

Telecom yesterday moved to pre-empt Government regulation with a promise to split its fixed-line business into a wholesale operation serving its rivals and a retail operation serving thepublic.

The company also said chief executive Theresa Gattung - who has faced calls from investors to step down - would keep her job at the top of the new structure.

Gattung gave little detail yesterday, but said the aim of the reorganisation was to create "transparent and non-discriminatory access" for wholesale and retail customers.

The move appears well-timed to take advantage of a clause in proposed telecommunications legislation, introduced on Monday.

Clause 59 of the Government's unbundling bill gives Telecom a way to avoid regulation if it can "supply a service to all access-seekers under a voluntary undertaking to the [Commerce] Commission".

Gattung and chairman-designate Wayne Boyd said they had not fully read the bill, and the timing of the announcement was coincidental.

"I don't even know what clause 59 is," Gattung said.

Competitors were sceptical about the intent of the announcement.

TelstraClear chief executive Allan Freeth welcomed the sentiment, but said the move had no substance.

"It seems to me to be a move by a reasonably punch-drunk and desperate company."

Communications Minister David Cunliffe welcomed the change "on the face of it", but was also looking forward to getting more details.

Boyd confirmed Gattung's position - for the time being, at least.

He said she and the rest of the management team had the full support of Telecom's board of directors for the implementation of the reorganisation.

Boyd said no significant review of Gattung's performance had taken place, as no search for a replacement had been conducted.

Investors have called for Gattung to be sacked.

"I think it is disappointing she is staying," said one fund manager.

Others said the announcement did little to alleviate the uncertainty surrounding the company.

The market was largely underwhelmed by the move. Telecom shares fell 1c yesterday to close at $4.09.

More details of the plan will be announced with the company's full-year earnings report on August 4.

Telecom said the retail division would have a consumer section run by Kevin Kenrick and a business section run by Simon Moutter.

A new person would be appointed this week to run the wholesale division. All would report to Gattung.

The operational split will apply only to fixed-line services, and not the mobile phone business.

"At the moment, this is really focused more on the broadband world, the fixed line services and the things that are already within the regulatory paradigm. Mobile might get there," Gattung said.

"There's a limit to how much we can do at any one time."

One into two

* Telecom will voluntarily separate its wholesale and retail operations.

* The wholesale operation will sell fixed-line services to competitors under the same terms and conditions as its retail division, maintaining "equivalent" and "transparent" processes.

* The set-up will be limited to landlines and broadband. It will not include mobile phones.

* The company will give further detail with its full-year earnings report on August 4.