Telecom NZ ready to compromise in pursuit of $1.5b broadband deal

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TELECOM NEW ZEALAND has caved in to government pressure and will consider splitting into two companies, making it more likely the NZ government's $1.5 billion plan to roll out ultrafast broadband to three-quarters of homes will get off the ground.

Falling revenue from mobile and fixed line services have forced Telecom to issue an earnings downgrade, as management continue to spruik their Australian subsidiary, AAPT.

The chief executive, Paul Reynolds, said the company was open to working with the government on a ''full range of approaches'' to its broadband initiative, after slashing its profit forecast by hundreds of millions over three years. Telecom also announced it would axe 200 management jobs by July.

A split would likely see Telecom's fixed-line network separated from its retail business, allowing its 23,000 kilometres of fibre-optic cable to become the nucleus of the new home and business fibre network, which the government hopes will revitalise the country's economic fortunes and help catch up with living standards in Australia.

Officials speculated in January that Telecom would blink first in its game of chicken with the government over its broadband plan by considering structural separation. However, this was downplayed by Mr Reynolds at the time, who said there had been no change in the company's stance on structural separation, which was a ''costly and complex exercise'' that had not stacked up elsewhere.

The NZ Communications Minister, Steven Joyce, said he did not have the power to influence Telecom's future moves.

Telecom NZ ready to compromise in pursuit of $1.5b broadband deal