Telstra here for as long as it takes: Mansfield

By PETER GRIFFIN telecoms writer

Visiting Telstra chairman Bob Mansfield says the Aussie giant is in the New Zealand market for the long haul through subsidiary TelstraClear, even if it takes a decade to provide true competition to Telecom.

Checking in on TelstraClear as the company awaits rulings from the Commerce Commission on several issues affecting its future, Mansfield urged Telecom to take a more realistic approach to wholesaling its network services and treat competitors as serious customers.

After seven years of regulatory prodding Telstra had come to that conclusion in its home market and was profiting from it, he said.

"After we woke up we realised we had a wholesale business turning over A$2 billion, 12 per cent of the company's revenue."

TelstraClear had contributed A$138 million in revenue to Telstra's accounts in the three months to September 30, bringing Telstra's revenue for the quarter to A$5.5 billion - more than Telecom's revenue for an entire year.

Telstra hopes lower network charges and wholesale rates imposed by the telecommunications commissioner will allow it to use Telecom's network to reach customers where it has no infrastructure.

TelstraClear is already a big wholesale customer of Telecom's but Mansfield said the relationship between the two was strained compared with that of Telstra Wholesale and Telecom's Australian interest, AAPT.

"Where AAPT [Telecom] deals with a salesman, incentivised to sell it wholesale products, we deal with a [Telecom] lawyer."

While more favourable terms on interconnect and wholesaling are expected to be handed down by the commissioner before year's end, the contentious issue of dividing up the cost of the Kiwi Share obligation also has to be settled.

Telecom recently shocked the industry with a claim that it faced a financial burden of $425 million a year meeting its obligations of providing telecoms services to unprofitable customers in rural areas.

Mansfield said the figure was "off the board" and could not be taken seriously.

Telstra had played the same game in Australia calculating its universal service obligation at A$1.7 billion. The final figure accepted by the regulator and divided among telco players based on market share was A$211 million.

Mansfield said the figure in other countries with service obligation schemes typically equated to 1 per cent of the incumbent telco's revenue.

That would put the size of the Kiwi Share at about $55 million, based on Telecom's revenue in the last financial year of more than $5.5 billion.

Mansfield said Telstra's bid to raise at least $200 million through a commercial paper issue was progressing well with the first $50 million tranche offered to the market closing oversubscribed last week.

He was upbeat about a meeting he had with Telecom chairman Rod Deane and recent discussions Telecom chief Theresa Gattung held with her counterpart at Telstra, Ziggy Switkowski.

But at the end of the day TelstraClear was ready for a long fight to win market share and make more than $1 billion of investment in New Zealand pay off.

"This is important for us, but relatively small," said Mansfield.

"It could take three years or 10 years."