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Monday, 18 April 2011 18:30

Telecom NZ gears up to participate in or compete against NZ Government FTTH network

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Telecom New Zealand says it has submitted its final proposal in it bid to win the lion's share of the New Zealand Government's planned FTTH network, warning that it will compete if its proposal is not accepted.

Under its $NZ1.5b Ultrafast Broadband (UFB) initiative the NZ Government aims to bring fibre to 75 percent of homes within 10 years. To achieve this it as set up a government company Crown Fibre Holdings (CFH), which will form joint ventures - local fibre companies - with the successful bidders for different areas.

In August 2010 Telecom NZ made an offer of full structural separation if it were selected to build not only the entire $NZ1.5b UFB network serving major centres, but also the $300m planned rural network.

However, the two projects are being run quite separately - Crown Fibre Holdings has no role in the rural broadband initiative. Crown Fibre Holdings did announce in December 2010 that Telecom had been selected for 'priority negotiations' for 25 of the areas of the UFB rollout, but subsequently also named Vector Limited for prioritised negotiations for the key Auckland region.

Telecom now says it has submitted its final proposal to Crown Fibre Holdings and has "accelerated the reorganisation of its business to meet the competitive challenge of a fibre-based world."

Telecom CEO, Paul Reynolds, said: "Our proposal meets all of the key components of the UFB vision. It would see the creation of a completely new listed company, Chorus, to deliver an open-access, national, fibre-to-the-home network...Our focus now shifts from negotiating with CFH to getting ready for the UFB environment, which will see us either demerging as the UFB partner or competing with new entrants in the access business."

Reynolds added: "Our proposal meets all of the key components of the UFB vision. It would see the creation of a completely new listed company, Chorus, to deliver an open-access, national, fibre-to-the-home network."

He claimed that: "Telecom's bid represents a once-in-a-generation opportunity for New Zealand to create a national, entirely open-access, fibre network which builds on what's already installed, avoids needless duplication and waste and utilises a first-class, national team of experts. It would allow competition and consumer choice to flourish, would attract huge investment of up to $NZ6 billion and ultimately contribute to the transformation of important sectors of our economy."

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Reynolds said that, regardless of the outcome, Telecom needed to start preparing now the advent of UFB. "Whether or not Telecom is a chosen partner, UFB will fundamentally reshape the telecommunications industry in New Zealand. We aim to build confidence by creating even greater separation between Telecom's regulated and commercial services, and also build competitiveness through a leaner and more agile organisation."

According to Reynolds, "The new structure aims to eliminate duplication in corporate services, technology platforms, products and customer delivery processes, thereby lowering costs and enabling better service for customers."

The changes are as follows:
- Mark Ratcliffe, who has led Telecom's UFB bid team, will resume his role as CEO of the Chorus access network unit, while retaining the lead on UFB matters with the Crown.

- In anticipation of regulatory change and demerger, the regulated Wholesale business will progressively align with Chorus over the year ahead "to provide a more seamless service for Wholesale customers." As a first move, acting CEO of Wholesale, Nick Clarke, will step back from Telecom Group issues and will stand down from the Telecom executive, but will continue to report directly to Reynolds.

- A major new executive role, chief product officer, has been created "to improve the performance of product and pricing activity across the company." Teams from Retail, Gen-i, commercial Wholesale and the entire TNZI business will move into this new business unit.

- Telecom's existing five corporate centre executives - finance, HR, strategy, legal and corporate relations - will reduce to three corporate services executive roles.

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