Monday, May 24, 2010

New Zealand - Telecom is considering voluntary separation of the copper network

[3news] Telecom has taken another battering on the share market, after it confirmed it was considering breaking up its business.

The telecommunications giant is looking at selling off Chorus – the division that makes the copper wire network – so that it can take part in the roll-out of ultra-fast broadband.

Under Government rules, no company can both own the network and sell services on it.

“The Government specified that this network couldn’t become a monopoly, or be owned or controlled by any one player to the disadvantage of others,” says telecommunications analyst Rosalie Nelson.

So chief executive Paul Reynolds has announced the company is investigating structural separation, in order to participate in the fibre network.

Telecom would not elaborate when approached by 3 News for comment, but the announcement could mean Telecom sells off part of Chorus to other broadband investors.

A similar structure already operates in the power industry, where the power generators sell to retail electricity companies who then on-sell to the customer.

What it means is that Telecom is fitting around the rules the Government has set for the ultra-fast broadband project, instead of waiting for the Government to fit around it.

Telecom’s potential break-up would be the first of its kind in the telecommunications world.

Investors aren’t so sure about it, sending the share price to a record low.

Telecommunications Association spokesman, Ernie Newman says people shouldn’t rush to judgement.

“I think there is a lot of detail to come through and I think we all need to keep our powder dry a little bit,” he says.

As for the consumer, all this industry restructuring won’t mean much at all until ultra-fast broadband finally gets to their home.

That won’t be for another five to 10 years.

Telecom talks structural separation in broadband bid

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