Telecom NZ likely for UFB contracts: Analysts

Legislation to aid the structural separation of Telecom NZ has progressed, the country's government has confirmed

New Zealand's incumbent telco is expected to pick up at least some of the contracts to build the country's equivalent of the National Broadband Network (NBN), with legislation governing the structural separation of Telecom New Zealand (ASX:TEL) progressing to cabinet.

The company is currently a “prioritised bidder” for building up to 25 centres as part of the national network but is yet to secure finalised contracts with Crown Fibre Holdings, the government company overseeing the project. Should that happen, it has agreed to structurally separate, removing its wholesale and retail vertical integration.

With NZ Minister for Communications and Information Technology, Steven Joyce, this week announcing further amendments to potential legislation governing the separation, analysts have predicted greater likelihood of the telco gaining a part in building the network.

According to IDC analyst, Rosalie Nelson, the telco is effectively hedging its bets on the project, with indications it will compete with the network should it be excluded from the project.

“Unlike Telstra in Australia, Telecom has already invested in a lot of copper upgrades and next generation networks so it will focus on making the most of the copper assets that it’s got while it can still meet demand through that,” she told Computerworld Australia.

Telecommunications Users Association of New Zealand (TUANZ) chief executive, Paul Brislen, agreed.

“Telecom will only split in two if it wins the UFB; if not, it's business as usual and although it's backed away from the statement, it did say early on that it would compete vigorously with any winner,” he said.

Telecom currently accounts of 58 per cent of the New Zealand broadband market according to Nelson, providing a significant advantage of smaller carriers or competing bidders for the Ultra Fibre Broadband (UFB) initiative.

Nelson said it was generally in the government's best interests to involve Telecom in the project, but that a similar agreement to the $11 billion deal struck between NBN wholesaler NBN Co and Telstra was unlikely to be replicated here.

"The structure of the process has made it quite difficult for Telecom to participate… There are conditions associated with this, they’ve got to have a deal to sell to shareholders," she said.

“We’ve always believed that Telecom was central to the success of the UFB; they’ve got the scale, and they’ve got a lot of fibre that’s already in the ground, the existing assets.”

Joyce said the legislation amendments announced this week have provided a chance for greater input by the industry into Telecom's role and potential separation.

"The proposed amendments have been designed to preserve protections for end-users and competitors, reduce unnecessary costs and complexities, and ensure Telecom is neither unduly advantaged nor disadvantaged by de-merging in areas such as tax and land access.”

However, Joyce said the Crown Fibre Holdings was not inhibited in anyway from prioritising negotiations with additional parties it is in active discussions with. That statement was confirmed later in the week when the project's lead agency confirmed progress in discussions with UFB bidder, Vector Limited, for potential rollout of fibre in Auckland.

Follow Chloe Herrick on Twitter: @chloe_CW

Follow Computerworld Australia on Twitter: @ComputerworldAU

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Tags telecom new zealandTelecomunication User Association of New Zealand (TUANZ)ASX:TELPaul BrislenSteven Joyce

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