Telecom loyalty offer slowed down broadband investment, regulator says

By Paul McBeth

Nov. 12 (BusinessWire) – The wholesale loyalty offer that’s landed Telecom Corp. in trouble with the Commerce Commission has been blamed for a slowdown in unbundling the local loop in the first half of this year.

Subdued growth in the unbundling in the first six months of 2009 “is likely to have been affected by Telecom’s wholesale loyalty offers encouraging the sale of broadband plans that rely on a wholesale bitstream service rather than unbundled lines,” the regulator said in its twice-yearly monitoring report of the telecommunications sector.

The Commission expects stronger growth will resume now the loyalty offers have been withdrawn and since TelstraClear Ltd., the New Zealand unit of Telstra Corp., launched its new retail broadband services using unbundled lines last month.

The country’s largest telecommunications company will have to face the Commerce Commission in the High Court after rival Vodafone NZ and state-owned Kordia Ltd. complained to the Independent Oversight Group. They claimed the offer would prevent them from further unbundling local exchanges and would kill-off their wholesale fixed-line business. Telecom faces fines of up to $10 million per breach if the regulator wins.

Shares in Telecom were unchanged at $2.54 in trading today and have climbed 8.7% this year. Telstra’s New Zealand stock climbed 1.5% to $4.16 on the NZX today and has sunk 9.9% in the year to date.

The Commerce Commission report also found the take-up of broadband services continued to grow above the OECD average at an annual rate of about 14%, and that pricing for broadband services was broadly in line with similar developed nations.

There was strong growth in the number of wholesale services offered, with the number of Telecom’s residential lines sold by a rival company doubling in the past two years to 250,000 as at June 30 this year.

The report praised the entry of mobile operator Two Degrees Mobile Ltd. which had brought down New Zealand’s prepaid prices on mobile calls below the OECD average benchmark for the first time.

“Prepaid plans are important to New Zealand consumers as approximately two thirds of mobile subscribers in New Zealand use prepaid plans,” said Telecommunications Commissioner Ross Patterson in a statement. “Consumers now have more choice and better pricing in the prepaid mobile market.”

Since entering the market in August, the regulator estimates Two Degrees has soaked up some 11,000 customers from Vodafone who took their 021 numbers with them. About 3,000 took their 021 number to Telecom’s XT network.

Vodafone shed 27,000 customers in the three months through September, according to parent Vodafone Group PLC first-half report. About 71% of Vodafone NZ’s 2.5 million customers are on pre-paid plans.

(BusinessWire)