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Investor confidence rocked by Telecom move

John Key MP
National Party Finance Spokesman
09 May 2006

Investor confidence rocked by Telecom move

The Government’s hamfisted unbundling announcement and threat to separate Telecom into lines and retail operations has ramifications way beyond the company, says National Finance spokesman John Key.

“This has put real jitters into the New Zealand sharemarket. The economy has already slowed and this clumsy threat has investors worried it will extend to other sectors, like energy.

“The proposed accounting separation of Telecom, with the veiled threat that the Government will eventually split the company up, has sent a shiver down investors’ spines.

Cabinet papers on the unbundling direct officials to ‘commence investigation into whether Telecom NZ should be subject to structural or operational separation (for example, into wholesale and non-wholesale businesses) taking into consideration Telecom’s cooperation in meeting the Government’s broadband objectives…’

“Protracted uncertainty is unhelpful and overt threats like this are the domain of schoolyard bullies. This was a time for the Government to act with great clarity,” says Mr Key.

“For the Labour Government to leave up in the air for the next year and a half whether Telecom is split up, is irresponsible and sends all the wrong signals to both foreign and domestic investors.

“Labour doesn’t care about what investors think, of course. Labour has little understanding of capital markets and the vital importance that confidence plays in their healthy operation.

“But New Zealanders should be very concerned about how the Government has handled this issue. Investors are the ones who provide the capital that effectively employs hundreds of thousands of Kiwis.

“The Government’s Budget bungle and its schoolyard threats have made investors worried about what else is around the corner and whether other sectors – like energy – should be nervous as well.

“And the message to foreign investors from Labour is: don’t bother with New Zealand – it’s all too hard.”

ENDS

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