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Kiwi Share Reform "long overdue"

Media Release

22 December 2005

Kiwi Share Reform "long overdue"

Mobile operator Vodafone today called on the government to move ahead with what it called "long overdue reforms" to the Kiwi Share arrangements.

"The Kiwi Share is now hurting the very customers whose interests it was designed to protect and the time has come for a major overhaul," said Vodafone Finance Director David Sullivan.

Vodafone was responding to today's announcement by the Commerce Commission that it would have to subsidise fixed-line operator Telecom to the tune of $9.5 million for the period 2003/04, for losses on some of its "commercially non-viable customers".

"As a mobile-only operator, we don't think it's reasonable for us to have to subsidise Telecom's provision of fixed-line services. Vodafone would like the opportunity to compete rather than prop up the competition - and we believe customers in regional New Zealand deserve real choice."

Sullivan called on the government to support a "Three Point Plan for Regional New Zealand" to promote competition in telecommunications services. He said such a plan should include:

1. Immediate disclosure of the general location of the customers which Telecom claims are "commercially non-viable";

2. Agreement to initiate a wide-ranging review of the way Telecommunications Service Obligations are provided; and

3. An in-depth audit of the quality of telecommunications service being experienced by regional New Zealand.

Vodafone will continue to advocate policy changes that will provide consumers with greater choice in telecommunications. A Parliamentary Select Committee will be hearing public submissions on a new Telecommunications Amendment Bill during 2006.

Note to editors:

The Kiwi Share is a private contract agreed in 1990 between Telecom and the Government. Under this agreement Telecom agreed to continue to provide local residential phone services to all existing customers, not to increase the standard monthly fee by more than the rate of inflation, and to continue to offer unlimited local calls for no charge beyond the monthly fee.

The agreement was revised in 2001 to include the provision of slow-speed dial-up internet to most Telecom customers and incorporated into legislation as a Telecommunications Service Obligation. This incorporation had the effect of forcing Telecom's competitors to contribute to the losses that Telecom makes on customers who are "commercially non-viable", i.e., customers who generate revenues less than the costs of serving them. The amount of these losses is estimated annually by the Commerce Commission.


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