26 November 2013

Govt Must Resist Aussie Corporate Bullying Over Copper Tax

Prime Minister John Key must resist attempts by Australian-based fund manager Investors Mutual Ltd (IML) to bully his government into imposing a copper tax on every Kiwi household and business, the Coalition for Fair Internet Pricing said today.

In a letter last week to Mr Key, leaked to the National Business Review, IML’s senior portfolio manager, Simon Conn, says his fund will invest no more in New Zealand companies unless parliament legislates to override the independent regulator, the Commerce Commission, and imposes a copper tax on every Kiwi household and business.

IML’s website claims it had more than NZ$4.4 billion under management in February 2013 but it is not one of Chorus’s top twenty shareholders meaning it has less than NZ$5 million invested in the New Zealand copper lines monopolist. Nor is IML reported to be a top twenty shareholder in Telecom New Zealand or any other Kiwi telecommunications company.

“Mr Conn seems not to know that in New Zealand, unlike other countries he may be familiar with, governments have traditionally respected the role of independent regulators and have not rolled over in the face of special-interest pleading from foreign fund managers, especially ones with so little invested in our country,” a spokeswoman for the coalition, Sue Chetwin, also chief executive of Consumer NZ, said today.

In his letter to Mr Key, Mr Conn said IML invested in Chorus because it was ‘attracted to the highly recurrent cashflows’ it generates from its copper monopoly, which ‘would enable Chorus to pay a regular and consistent dividend to shareholders’.

Last year, Chorus made monopoly profits of $171 million and paid $95 million in dividends to shareholders, of which up to $600,000 would have been paid to IML. At the same time, Mr Key has told parliament that Chorus chair Sue Sheldon privately provided him with confidential information that indicated her company was at risk of going broke. Despite this, the copper monopolist planned until recently to pay another $100 million to its shareholders in 2013/14 dividends.

Mr Conn’s letter also slammed the New Zealand Commerce Commission, saying it was acting unlawfully. The NBR says he went on to attack Mr Key’s government, saying he had thought Mr Key’s election ‘heralded the return of sensible government where investments are not subject to adverse regulation and the rule of law is upheld’.

He criticised Mr Key and Communications & IT Minister Amy Adams for not immediately over-ruling the Commerce Commission and instead making ‘ambivalent’ statements about Chorus.

Ms Chetwin said Mr Conn’s letter and public comments were “arrogant and uncalled for, especially from a fund without a major stake in New Zealand or its telecommunications industry”.

“We don’t need an Australian fund manager like Mr Conn falsely claiming that our independent regulators are acting unlawfully and then going on to demand our prime minister and parliament impose extra costs on every Kiwi household and business to support his dividend flows,” she said.

“Kiwis have rejected the copper tax because it is unfair, inequitable, totally unnecessary to the completion of our new ultra-fast broadband network, and would simply be paid in dividends to people like Mr Conn. Mr Key must resist this Australian corporate bullying,” she concluded.

ENDS

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