KEY POINTS:
Australian phone company Telstra is unlikely to fold its New Zealand business TelstraClear, despite having had a rocky year, experts say.
Telecommunications analyst David Kennedy of Ovum said that although TelstraClear's commitment to the New Zealand market had become less certain in recent months, he did not expect
Telstra to cut its New Zealand business adrift when it announced its annual result today..
"This Telstra management is quite focused on the domestic [Australian] market," said Kennedy. "The fact that things are getting so sticky ... is probably absorbing a lot of their headspace right now, which I think is another reason why they wouldn't be keen to make any major decisions at this point in time."
Telstra last week announced it would sue the Australian Communications Minister Helen Coonan over the awarding of almost A$1 billion ($1.12 billion) to a rival consortium aimed at improving broadband in rural areas.
Another rival consortium - the G9, led by Optus and including Telecom-owned AAPT - plans to fight Telstra's market dominance with a A$3.6 billion ($4.04 billion) high-speed broadband network.
Telstra is also facing criticism of its new "Next G" mobile network, which consumers claim does not provide them with the same level of coverage as its old CDMA network.
Kennedy said TelstraClear's revenue had fallen over the past 12 months, expenses remained flat and profits had eroded.
"Although TelstraClear does not publish revenue breakdown that would pinpoint the problem, Telstra management in Australia has expressed public displeasure at TelstraClear's inability to capitalise on industry growth in areas such as broadband," Kennedy said.
Government decisions on telecommunications regulation - in particular the pricing and terms for local loop unbundling - could dramatically change TelstraClear's competitive position, he said.
"In terms of making a decision about the future of TelstraClear, they're in a bit of an awkward position because they don't at this stage know how the new regulatory regime in New Zealand is going to pan out," said Kennedy.
He said it was important for the company to maintain a New Zealand presence to support transtasman business customers - particularly after Telecom's purchase of network company PowerTel to merge with its Australian business AAPT.
A TelstraClear spokesperson said the company was unable to comment on its future direction until after Telstra's results announcement.
TelstraClear has had an eventful year.
In December, chief executive Allan Freeth sent a message to staff warning them New Zealand's second largest telco was on a "trajectory to disaster" unless staff worked harder.
The company cancelled its $50 million high-speed Tauranga mobile network in April, blaming an "11th-hour" change to a roaming agreement with Vodafone and in June ended an agency agreement with Vodafone to resell mobile services.
In July, TelstraClear announced over 100 jobs would move to Australia over the next two years.
