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TSO Loss Calculation Comparable To Australia’s

Revised TSO Loss Calculation Comparable To Australia’s

Telecom’s recalculation of the TSO loss following changes to the calculation method requested by the Commerce Commission has seen the loss reduce from NZ$425 million to NZ$408 million a year.

Calculation changes included more use of averaged revenue per customer rather than actual customer specific revenue, and changes to the treatment of calls between the fixed network and mobile phones.

General Manager Government and Industry Relations Bruce Parkes said the revised amount is comparable to the loss amount of about A$1.5 billion that Telstra shares with its competitors in Australia.

“In New Zealand a key driver of the TSO loss calculation is the cost to Telecom of providing free local calls whereas in Australia, Telstra is able to charge its residential customers for local calling.

“When you take this key difference into account, Telecom believes its loss calculation of NZ$408 million is realistic.”

Mr Parkes said in Australia, Telstra collects two sources of revenue to cover its equivalent of the TSO.

“The first is a per minute premium on interconnect charges known as the access deficit charge. This amounts to around A$1.2 billion.

“The second is a Universal Service Obligation calculation, which amounts to around A$300 million. This gives a total amount of A$1.5 billion compared to our loss calculation of NZ$408 million.”

At the Commission’s request, Telecom has also provided a sensitivity analysis on the effect of using a lower cost of capital in the calculation.

Telecom has used a cost of capital of 13.2%. The Commission has said it has made no decision on the cost of capital it considers appropriate, but wanted to quantify the effect of lower capital costs on the calculation.

Telecom has told the Commission that reducing the cost of capital by 5% (or over a third) to 8.2% would reduce the TSO loss calculation to NZ$210 million.


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