Telecom upbeat as Govt cuts holiday from broadband bill

Telecom chief executive Paul Reynolds. Photo / Paul Estcourt

Telecom was upbeat after the Government flip-flopped yesterday on a central plank of its proposed ultra-fast broadband law. Its shares rose as investors interpreted the removal of the "regulatory holiday" provision as putting Telecom in pole position to build the network.

Telecom was one of the only industry players not to rail against the proposed law, which would have removed the Commerce Commission's ability to regulate price on the broadband network until December 31, 2019.

The holiday was designed to assure investors the commission could not intervene, so broadband prices would remain stable and money put into the scheme would yield a return. That would give investors confidence to put funds towards the internet scheme.

Although the holiday sparked outcry from the rest of the industry, Telecom said in March that, from an investor point of view, the 8 year forbearance period was not long enough.

But Communications Minister Steven Joyce said a "contractual mechanism" would replace forbearance in the Telecommunications (TSO, Broadband and Other Matters) Amendment Bill.

The law paves the way for the Government to deliver fibre-based internet to 75 per cent of the country, offering speeds of up to 100 megabits a second.

Joyce explained the new provision brings the commission back into the fold but also compensates investors if prices are regulated.

If prices were interfered with, the Government would stretch out the period in which its private partner needed to pay back the $1.35 billion of public money being put into the scheme.

The taxpayer would not end up footing the bill, he said.

Telecom chief executive Paul Reynolds said yesterday the company was "comfortable in principle" with the Government's move.

"[The change] appears to adopt a standard contractual approach to public private partnership (PPP) arrangements," Reynolds said.

"They should therefore provide investors with the necessary degree of certainty while also ensuring the industry is comfortable with the level of regulatory oversight."

The market also seemed comfortable with the change and Telecom's shares, which fell 3.5c early, climbed 4.5c to $2.37.5 yesterday, with trading volumes jumping to a 10-day high.

Telecommunications Users Association chief executive Paul Brislen said the change removed a hurdle for Telecom's broadband bid and would be looked on favourably by shareholders.

"It means there is no more noise saying 'Oh, we shouldn't give it to [Telecom] because it's completely without oversight'.

"I think [shareholders] think that without all that noise, Telecom is in a good position to win it.

"It comes back to that argument that only Telecom can deliver that nationwide solution because it's so far down the track anyway," he said.

Telecom is bidding to build the network in 25 of the 33 regions receiving fibre-based internet in the ultra-fast broadband scheme.

Joyce said the changes would not affect negotiations with bidders.