Clear Refuses to Pay Telecom Debt Until Ruling

Telecom New Zealand's "spurious claim" for NZ$20 million (10.5 million [M]) in debts represents illegal overcharging, says Clear.

Telecom has sought orders in the High Court over Clear's "mounting debt" for disputed interconnection charges which it says exceed NZ$20 million.

However, Clear Communications spokesman Clayton Cosgrove says Clear does "not owe Telecom any money. Both the High Court and the Court of Appeal have said we don't have to pay pending trial (and even then) we don't expect to have to pay one cent," he says.

Clear has been refusing to pay part of the interconnection fee charged by Telecom because it considers the fee to be anticompetitive. Clear says a portion of interconnection charges levied in its agreement with Telecom are in breach of competition provisions in the Commerce Act. Since February it has been witholding around 15 percent of amounts due.

The debt, says Telecom spokesman Clive Litt, is rising monthly and could reach as much as NZ$40 million by the time the matter is settled in the courts. "At the same time, Clear's profitability is reported to have dropped and there has even been some speculation Clear could run at a loss this year," he says.

Litt says a leading corporate financial adviser has advised Telecom it is "commercially imprudent" to be an unsecured creditor of Clear for a sum of this size.

"We believe there would be real doubt about Clear's ability to (pay)," he says. Telecom has asked the Court to safeguard the debt if the money cannot be secured."

He added, "We have proposed a variety of ways of achieving this, (including) appointing a receiver over the debt, having the withheld amounts paid into an interest bearing account held by the Registrar of the High Court or by Clear providing security for the sum."

In response, Cosgrove says, "Why would we pay money now, even to a third party, when two superior courts have said we don't have to?"

He denies that Clear would have difficulty paying the NZ$20 million. "But (the point is) we don't believe we owe it, and British Telecom, which has been a shareholder for over three years, doesn't consider the (fee) retentions a liability."

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