Editorial: Telecom way out of touch

OPINION: What a never-ending mess. The ongoing palaver with Telecom's XT network could be the most embarrassing business failure in New Zealand this decade. It's hard to think of anything that comes close to the repeated outages that have plagued the mobile network launched last year to much fanfare. Even power problems are not this regular.

There have been four XT failures south of Taupo since Christmas, including a fresh one on Monday, leaving hundreds of thousands of mobile users furious.

Chief executive Paul Reynolds must now be cursing the speech he gave to a group of customers at a Christmas function, during which he said that XT, which cost $574 million, was "probably the best mobile network in the world". Oh the schadenfreude.

The system was meant to be Telecom's great white knight, enabling it to reverse the trend which has seen its share of revenue from New Zealand's $2 billion mobile market ebb away. Moreover the impact could be even more acute for the company, with the failures coming at a time when it has been trying to convince the Government it is the most reliable partner to roll out the planned $1.5 billion ultrafast broadband initiative.

Telecom's blundering approach to fixing the situation has not helped. Following a fault last month which hit about 200,000 customers south of Taupo, and left about 80,000 customers in Southland and Otago without service for up to three days, it announced a $5 million compensation package and plans to extend its mobile service (getting it working properly first is probably a better idea).

Customers were, understandably, far from impressed. Business clients, who literally live on their mobiles, were particularly put out and some have already signed up with other providers – though that is often no easy task because of contracts locking users in for set periods.

Mr Reynolds, once also considered somewhat of a white knight himself, has been busy trying to smooth over the widening cracks. On Tuesday he announced a further $10 million in compensation for customers, accepted the resignation of the company's chief technology officer and said the firm contracted to build the service – French giant Alcatel-Lucent – had been put "on notice".

The truth is that XT has been a mess from the start. Industry experts say the time frame for building the system was optimistic, Telecom was blinded by its long-running relationship with Alcatel-Lucent and the lack of a backup in case of failure was stupid.

To make matters even worse, the exact source of the fault is not yet known. All of this spells more trouble for Mr Reynolds. Telecom shares fell heavily after he said the problems would see the firm's net earnings at the lower end of the forecast range of $400 to $440 million. If he was not already nervous about his own position, he should be. Pushing the blame on to other people will only work for so long – particularly if the bottom line continues to fall. As he said: "One major disruption is enough. Several is intolerable."

- © Fairfax NZ News