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Draft paper on accounting separation of Telecom

Media Release
Issued 20 June 2008/no 163

Commission releases draft paper on accounting separation of Telecom

The Commerce Commission today issued a draft paper on the principles and regulatory reporting requirements for the accounting separation of Telecom. The draft paper outlines the financial information that Telecom must provide and the guidelines it must follow.

Under accounting separation, Telecom will be required to prepare financial information about several of its business units including the Retail, Wholesale, Chorus (fixed network access) and other fixed network services. This information will be publicly available and is designed to inform a wide audience about the operation and behaviour of these business units.

Telecommunications Commissioner, Dr Ross Patterson said, “This information, which will be publicly available, will provide improved transparency, identify any cross-subsidies and support non-discrimination. In doing so it will complement the non-financial reporting required by the operational separation undertakings.”

Under the draft paper, July 2008 to June 2009 will be a transitional year with the first financial information released in the second half of 2009. Full reporting under accounting separation will apply for the year July 2009 to June 2010. Interested parties are invited to make submissions on the draft paper. The closing date for submissions is 5pm, Friday 18 July 2008. Submissions received will be posted on the

Commission’s website. Interested parties are asked to indicate any confidentiality requirements at the time of their submission. The Commission anticipates that it will release a final version of the paper in August 2008.

A copy of the draft paper is available on the Commission’s website under Industry Regulation/Telecommunications/Accounting Separation of Telecom Background

The December 2006 amendments to the Telecommunications Act 2001 (‘the Act’) introduced new information disclosure requirements which include the accounting separation of Telecom. These regulatory reporting requirements are different to and in addition to the statutory financial reporting requirements and cover the reporting of many financial aspects of the operational separation of Telecom.

Under Part 2B of the Act, Telecom is required to prepare and disclose such information which the Commission requires as if any of its network, wholesale and retail activities were operated as independent or unrelated companies. The Act grants the Commission discretion to determine what information Telecom will be required to provide and the methodologies to be used in preparing it. This includes the discretion to request other forms of information such as cost information, asset valuations, non-financial information and information about certain other business activities.

This information which will be publicly available is intended to inform a wide audience about the relevant Telecom business activities, and will provide improved transparency, identify any cross-subsidies, and encourage non-discrimination. In doing so it will complement the non-financial reporting required by the operational separation undertakings.

The operational separation undertakings also require Telecom to prepare a Statement of Assets controlled by Chorus as at 1 July 2008 which is a separate requirement to the Accounting Separation requirements.


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