Telecom pushes out time of split of network arm

Telecom pushes out time of split of network arm

By Paul McBeth and Jason Krupp

Jan. 19 (BusinessDesk) – Telecom Corp., which is in the box seat to win the lion’s share of the government’s $1.35 billion roll-out of high-speed broadband, has pushed out the timeline to carve out its network business.

Chief executive Paul Reynolds said the target of structural separation by the end of June has been extended as it continues talks with the government’s Crown Fibre Holdings. Telecom was named a priority bidder for 25 regions, including Auckland, in December in what’s been a protracted negotiation with the government, and has offered to demerge its Chorus unit, which owns the fibre cable and copper line networks, from the service delivery unit.

Paul Richardson, who helps manage $300 million in equities for BT Funds Management, said the consensus view is that if Telecom has to split to be a part of the government-subsidised fibre roll-out. That’s “probably one of the better outcomes” and should be heartening for Telecom, which will have to sell the demerger to shareholders to get it across the line.

"The company is in a very difficult position if it does not contemplate some sort of structural move to form part of the broadband rollout," Richardson said. "If it is outside the fibre project it will be very difficult to defend its patch, so that's a risk to the company.”

In return for splitting its business, Telecom has indicated it expects substantial regulatory relief from the requirements imposed on the copper-wire service. Last month the Commerce Commission recommended some reprieve on the regulation of limited bundles that are resold by the phone company’s rivals.

The shares rose 0.4% to $2.28 in trading today, and have gained 4.2% so far this year.

(BusinessDesk)

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