NZ Telecom Separation Agreement Details, A Speculative List

Wednesday, 6 July 2011, 6:22 pm
Article: Alastair Thompson

Since NetHui in Auckland last week Scoop has been delving increasingly deeper into the question of where Telecom's assets are likely to be split under the separation arrangement currently being negotiated between the government and Telecom.

The following list is our current guess on where Telecom assets will be split.

According to Telecom the final agreement (scheme of arrangement) is expected to be presented to Telecom shareholders in August via an announcement by Telecom to the sharemarkets in NZ, the US and Australia in late August or early September.

Under the recently passed Telecommunications amendment bill Telecom has a deadline of 26th of August to present its "Asset Allocation Plan" to Telecommunications Minister Stephen Joyce.

Before then we (probably/hopefully)will get a public announcement from Telecommunications Minister Stephen Joyce on the subject. The Minister is not required in the Act to consult before he approves the plan.

In the meantime industry interest in the most important structural decisions around the NZ Telecommunications market made since the early 1990s privatisation of the Telecom is high.

While the following is not compiled from any "inside" information around the deal - it does come from discussions with a wide range of interested parties.

The guesses made here on the likely allocation are made on the basis of what we expect Telecom will be seeking and what the industry are likely lobbying for.

Whether this allocation is in the best interests of the consumer is a moot point - and whether it will deliver a step-change in fast broadband take-up and prices is also unclear.

Scoop understands Telecommunications Minister Stephen Joyce is involved in an ongoing process of receiving advice on the Government position. At the end of July he is due to receive from Telecom a set of undertakings which will be made by Chorus 2 around its wholesale services. These will be consulted on with the Telecommunications Commission.

Treasury and other government agencies and consultative bodies will likely be providing their opinions on the negotiations over the next few weeks

And in his address to NetHui last week Joyce said he would be consulting with some industry groups between now and separation including NZICT (the big software vendors), InternetNZ and an unknown content group - possible FACT. The commerce commission is undertaking a "demand side study" into UFB which will consider the what the drivers are around takeup - but that is not due to be released till next year.

In the list below the post separation companies are called Chorus 2 and Telecom 2 for want of better names.

Assets which are certain to go Chorus 2 are at the top of the list - the ones for discussion are in the middle - and the ones at the bottom are destined for Telecom 2.

CERTAINLY CHORUS 2

Last mile to the house (copper - and to be built up as fibre)

Cabinets in streets

Fibre to cabinets

Telephone exchanges

Fibre equipment switches in cabinets

ALMOST CERTAINLY CHORUS 2

VDSL and ADSL copper broadband equipment inside the cabinets (UBA - Unbundled Bitstream Wholesale)

Wholesale Customer relationships for last mile ADSL/VDSL/Voice

UNCLEAR - PROBABLY TELECOM 2

The ancient (circa 1980) copper voice switching equipment (NEAC) in many of Telecom's exchanges.

Telecom investment IP in VOIP replacement technology for local dialing (which is expected to enable closing down of the difficult to maintain and obsolete NEAC Switches).

MOST PROBABLY TELECOM 2

National Backhaul Fibre

Southern Cross Shareholding (50% of Southern Cross is owned by Telecom - 40% by Singtel/Optus and 10% by Verizon)

Wholesale Customer relationships on backhaul - national and international

CERTAINLY TELECOM 2

XT Network

All retail customer relationships (small business and residential)

Gen-I - i.e. bigger business customer relationships

Telecom Retail Shops (etc.)

In addition to apportioning the assets, the Asset Allocation Plan is also required to apportion where Telecom's liabilities lie post separation. And then finally there is also a shared services section which will need to be agreed.

ENDS

© Scoop Media

Alastair Thompson

Scoop Publisher

Alastair Thompson is the co-founder of Scoop. He is of Scottish and Irish extraction and from Wellington, New Zealand. Alastair has 24 years experience in the media, at the Dominion, National Business Review, North & South magazine, Straight Furrow newspaper and online since 1997. He is the winner of several journalism awards for business and investigative work.

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