Telecom split first in world

TOM PULLAR-STRECKER
Last updated 05:00 27/10/2011

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Telecom will make history by becoming the first "incumbent" telco in the world to voluntarily split in two next month, after Telecom shareholders rubber-stamped the structural separation of the company.

Despite years of intrigue and speculation in the run-up to the decision, there was negligible opposition and no questions asked by shareholders at the company's annual meeting in Auckland.

Votes were received from investors holding two-thirds of the company, with 99.8 per cent in favour of the split.

The vote clears the way for network business Chorus to list on the NZX next month and to secure $929 million of government funding to lay fibre-optic cable to homes and businesses in 24 of the country's largest cities, including Wellington and Auckland, under the $3.5 billion ultrafast broadband scheme.

Telecom chief executive Paul Reynolds said the separation vote was unprecedented. "The rest of the world is watching us with great interest and intensity. We are, in New Zealand, significantly ahead of the rest of the world in this key policy area."

Communications Minister Steven Joyce said it was the most significant change in the industry for 20 years, when Telecom was privatised.

IDC Research analyst Rosalie Nelson said Reynolds was right to describe the split as a first. Lots of countries were watching closely but not necessarily following.

"The reason it is of so much interest internationally is the industry is facing increasing pressure to invest in ever more expensive networks without real signs of the money. As a result, people are looking at what the role of governments might be. New Zealand will be regarded, we think, very much as a test bed."

Chorus faced challenges building the ultrafast broadband network ahead of demand by the government-imposed 2020 deadline. In the long term, disconnecting the network from the services that run over it carried the risk that Chorus would have little incentive to keep pace with what its clients required. But Nelson said IDC was not discounting the possibility that structural separation and the UFB scheme might prove a global experiment that worked.

In Australia, Telstra shareholders this month voted more than 99 per cent in favour of a deal under which Telstra will be paid A$11 billion (NZ$14.3b) over 30 years to switch customers to the government-owned National Broadband Network, effectively separating telecommunications retailing from the network there. But that agreement is still subject to regulatory approval.

Gartner telecommunications analyst Geoff Johnson, based in Brisbane, said New Zealand's ultrafast broadband scheme was being watched as it appeared to be cost-effective and fast.

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- The Dominion Post

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