Government ratchets up pressure on Telecom

Prime Minister Helen Clark yesterday led a Government attack on Telecom in retaliation for the humiliating leak it was forced to endure this week.

And as the company's share price fell a further 5 per cent Telecom appeared to respond to the pressure and adopt a more conciliatory stance.

Telecom said it had finished an investigation into the leak of the Government's broadband unbundling plans and had handed the results to the State Services Commission.

It would hand over the leaked Cabinet paper which it had earlier claimed - mistakenly, it said - to have destroyed.

Telecom is understood to know who leaked the document but refused to confirm or deny this yesterday or to say whether that information was being handed to the commission.

But in a signal it was volunteering the person's identity, or was likely to, Telecom spokesman John Goulter said the investigation had reached some "firm conclusions".

"I think it will help their inquiry and mean their inquiry will be quite swift."

Telecom's apparently placatory gestures came after warnings from Government insiders about its muscle-flexing with the document - interpreted as a deliberate display of commercial power designed to embarrass the Beehive.

The warnings were accompanied by "reminders" that the unbundling legislation was yet to go through a select committee process and could yet become even more unfavourable to Telecom.

Telecom-driven business attempts to lobby the Government on the broadband issue have also irritated ministers.

While the Government has not publicly asked Telecom to identify the person responsible for the leak, its emissaries have pointed out that in the present climate it might be in Telecom's future commercial interests to do so.

Helen Clark openly vented her displeasure, focusing on the company's handling of the broadband announcement.

"It is completely unacceptable behaviour [to leak] but that behaviour has nothing to do with the loss of value Telecom has suffered."

In the past two days, the company's value has plunged by $1.6 billion.

"Telecom has chosen to defend its market position in a very negative way," said Helen Clark.

"It is responsible for what has happened to the value of the company."

She contrasted it with British Telecom, which she noted had voluntarily separated its operations and had gone on to do well.

"That shows attitude and class, that's how a great company succeeds."

Also contributing to the pressure on Telecom is the Securities Commission, which the Herald understands has decided to launch an inquiry into the handling of the leaked material and any potential impact on the stock market or regulations governing the markets.

The commission has refused to comment on whether it is conducting an inquiry, in line with its general practice. National also tried to keep up the pressure yesterday, although its target was the Government.

Leader Don Brash is calling for a select committee inquiry into the leak of confidential Budget documents.

"Parliament and the public must have an opportunity to assess for themselves what went on, who was responsible and the role of ministers in briefing officials handling sensitive documents."

The State Services Commission, meanwhile, expects to have terms of reference for its inquiry ready within a few days.

It will have the power to summon witnesses and request evidence from Telecom as well as Government and non-Government agencies.

A retired judge or QC with interviewing skills might conduct it and forensic tests will also be carried out, if necessary. 

 
WHAT TELECOM SAID

Thursday May 4

* Telecom spokesman John Goulter told the Herald Telecom had destroyed the Cabinet paper.
* "That was the proper thing to do, that's what our legal advice was to do, so there was no question it could be distributed any further."

Yesterday

* Morning: Mr Goulter repeats to the New Zealand Press Association that Telecom has destroyed the document.
* About midday: Telecom issues a statement saying it still has one copy of the Cabinet paper which it will return to the Government.
* Mr Goulter later told the Herald there had been "some confusion" on his part." Copies which were made of the document have been destroyed, that was what our legal advice told us to do. One document was kept, also in line with legal advice."
* He told National Radio "two or three people" at Telecom had seen the paper.