Telecom New Zealand is set to be millions out of pocket as a result of the NZ Government’s decision to press ahead with its plans to deliver rural broadband services throughout the country.
In an ASX statement, the telco said that as a result of the rural broadband plans, its EBITDA guidance for each of the 2011, 2012, and 2013 financial years would be adversely affected by up to $56 million.
The plans, originally set out in September 2009, will see 97 per cent of rural NZ households gaining access to broadband speeds of at least 5Mbps. The plans also see reforms made to the existing Telecommunications Service Obligations (TSO).
Some 97 per cent of NZ schools will also be connected under the program and will gain access to speed of at least 100 Mbps. The remaining three per cent will gain access to speeds of at least 10Mbps.
Under the TSO reforms the methodology for calculating compensation for Telecom’s delivery of local service has been changed to take into account the full benefits and costs of being the nationwide supplier of the TSO service, according to the NZ government.
“It is anticipated that the benefits of being the nationwide supplier of the TSO will outweigh the cost for the foreseeable future and that consequently Telecom will not receive additional compensation under the Telecommunications Act 2001,” a statement from the government reads.
According to the NZ government, the rural broadband initiative – approved by the cabinet yesterday -- is expected to cost NZ$300 million and be funded via a NZ$48 million government grant and NZ$252 from a new Telecommunications Development Levy set up as part of the TSO reforms.
The rural broadband initiative is designed to give access to high speed broadband to the 25 per cent of New Zealanders not covered under the parallel NZ$1.5 billion Ultra-Fast Broadband initiative which aims to deliver services of at least 100Mbps to urban areas over the next 10 years.
In February Telecom waved the angry stick at Alcatel Lucent for its ongoing problems with its XT mobile network.
In January Telecom staked its claim to be the leading provider of Ultra-Fast Broadband (UFB) for NZ, submitting a “powerful proposition” in response to the Invitation to Participate in the UFB.