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slippers · 26th September 2007, 13:33

Telecom prepares to sell phone network
Govt releases Telecom separation determination
By TOM PULLAR-STRECKER - The Dominion Post | Wednesday, 26 September 2007
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Telecom is understood to have struck an informal deal with the Government to flog off its fixed-line telephone network, valued at more than $3 billion.
Muted response to govt's Telecom announcement
Blog: Why Helen should buy Telecom's network
View video

New chief executive Paul Reynolds and chairman Wayne Boyd are said to have cut the backroom pact after months of behind the scenes negotiations.

The sale would take place after the carve-up of the telecommunications giant.

But it is understood that Mr Cunliffe will not canvas using regulation to split Telecom's network arm into a separately-owned business.

That would be rendered unnecessary by the informal undertaking.

Instead, Telecom will first be broken into three businesses that will have to operate at arms' length, as previously planned.

One will manage its fixed-line network, another will wholesale services, and the third - which will most closely resemble an ordinary non-regulated business - will sell services to consumers and businesses.

Once the split is in place, Telecom will sell off the network, or separately list the network as another sharemarket company.

In the biggest New Zealand asset sale so far this year, Telecom sold directories business Yellow Pages to Hong Kong-based CCMP Capital Asia and Canada's Teachers' Private Capital for $2.24 billion in March.

Telecom shareholders got a $1.1 billion windfall in a capital repayment as a result.

Telecom spokesman Mark Watts declined to comment on suggestions from well-placed sources that the network could be sold.

"We will react in detail when we have seen what is announced," Mr Watts said.

Earlier this year Citigroup valued Telecom's fixed-line network at between $3.5 and $4.7 billion.

Telecom's outgoing chief financial officer, Marko Bogoievski, campaigned hard for Telecom to be allowed to sell its network arm and for a less complex form of operational separation of its wholesale and retail arms, that would have ensured they did not have to duplicate all their administration.

Telecom said that strict three-way operational separation would "suffocate" the company and stall investment in telecommunications infrastructure.

Communications Minister David Cunliffe denied the deal, however, when releasing the Government's separation determination for Telecom this morning in Auckland.

"There is no sell deal to sell off the Telecom network," he told reporters.

The minister said the government would stick with its original plan to force a split of the company into three separate operational units.

Mr Cunliffe told a media conference Telecom would need to split into wholesale, retail and network arms.

The minister said the operational separation of Telecom was a key part of the Government's strategy to deliver a more effective telecommunications sector.

"It will underpin increased competition and efficient investment for the long-term benefit of all New Zealanders," he said.

"I have issued my determination of further requirements for a robust three-way operational separation as the next formal step towards finalising legally enforceable undertakings by Telecom."

He said the determination reflected the separation model set out in the April discussion document, based on the reform of British Telecom.

Some amendments have been made to improve the efficacy of separation and to provide positive incentives to upgrade the network, with appropriate safeguards, he said

An Independent Oversight Group (IOG) would be set up to monitor the split.

The separation of Telecom would take place by March 31 and Telecom had 20 working days to prepare a draft separation plan.

Mr Cunliffe said the IOG would be a high-level watchdog within Telecom comprised of three independent members and have the power to report directly to the Commerce Commission where appropriate.

He said he had laid out the scope and governance of the new Access Network Services. The ANS unit will control and provide services that use the local access network including existing copper, and future fibre and wireless access, to ensure comprehensive service coverage and that the unit is forward-looking and future-proofed.

Mr Cunliffe said he was committed to having high quality operational separation undertakings in place as soon as is practicable.

Telecom said it had no immediate comment to the governmen's announcement but would put out a statement later today.

Telecom's shares lost around a third of their value in the wake of the original decision in May last year to force a split of the company and to open up its network to rivals.

Telecom shares closed yesterday on $4.30 and remain 25 percent below where they were before the announcement, although yesterday one share in every nine was cancelled as part of a capital return related to the sale of its Yellow Pages unit.

26th September 2007, 13:33	#1
slippers	Telecom selling fixed line service back to the govt? Telecom prepares to sell phone network Govt releases Telecom separation determination By TOM PULLAR-STRECKER - The Dominion Post \| Wednesday, 26 September 2007 Email a Friend \| Printable View \| Have Your Say Related Links • Subscribe to Archivestuff • Have your say Telecom is understood to have struck an informal deal with the Government to flog off its fixed-line telephone network, valued at more than $3 billion. Muted response to govt's Telecom announcement Blog: Why Helen should buy Telecom's network View video New chief executive Paul Reynolds and chairman Wayne Boyd are said to have cut the backroom pact after months of behind the scenes negotiations. The sale would take place after the carve-up of the telecommunications giant. But it is understood that Mr Cunliffe will not canvas using regulation to split Telecom's network arm into a separately-owned business. That would be rendered unnecessary by the informal undertaking. Instead, Telecom will first be broken into three businesses that will have to operate at arms' length, as previously planned. One will manage its fixed-line network, another will wholesale services, and the third - which will most closely resemble an ordinary non-regulated business - will sell services to consumers and businesses. Once the split is in place, Telecom will sell off the network, or separately list the network as another sharemarket company. In the biggest New Zealand asset sale so far this year, Telecom sold directories business Yellow Pages to Hong Kong-based CCMP Capital Asia and Canada's Teachers' Private Capital for $2.24 billion in March. Telecom shareholders got a $1.1 billion windfall in a capital repayment as a result. Telecom spokesman Mark Watts declined to comment on suggestions from well-placed sources that the network could be sold. "We will react in detail when we have seen what is announced," Mr Watts said. Earlier this year Citigroup valued Telecom's fixed-line network at between $3.5 and $4.7 billion. Telecom's outgoing chief financial officer, Marko Bogoievski, campaigned hard for Telecom to be allowed to sell its network arm and for a less complex form of operational separation of its wholesale and retail arms, that would have ensured they did not have to duplicate all their administration. Telecom said that strict three-way operational separation would "suffocate" the company and stall investment in telecommunications infrastructure. Communications Minister David Cunliffe denied the deal, however, when releasing the Government's separation determination for Telecom this morning in Auckland. "There is no sell deal to sell off the Telecom network," he told reporters. The minister said the government would stick with its original plan to force a split of the company into three separate operational units. Mr Cunliffe told a media conference Telecom would need to split into wholesale, retail and network arms. The minister said the operational separation of Telecom was a key part of the Government's strategy to deliver a more effective telecommunications sector. "It will underpin increased competition and efficient investment for the long-term benefit of all New Zealanders," he said. "I have issued my determination of further requirements for a robust three-way operational separation as the next formal step towards finalising legally enforceable undertakings by Telecom." He said the determination reflected the separation model set out in the April discussion document, based on the reform of British Telecom. Some amendments have been made to improve the efficacy of separation and to provide positive incentives to upgrade the network, with appropriate safeguards, he said An Independent Oversight Group (IOG) would be set up to monitor the split. The separation of Telecom would take place by March 31 and Telecom had 20 working days to prepare a draft separation plan. Mr Cunliffe said the IOG would be a high-level watchdog within Telecom comprised of three independent members and have the power to report directly to the Commerce Commission where appropriate. He said he had laid out the scope and governance of the new Access Network Services. The ANS unit will control and provide services that use the local access network including existing copper, and future fibre and wireless access, to ensure comprehensive service coverage and that the unit is forward-looking and future-proofed. Mr Cunliffe said he was committed to having high quality operational separation undertakings in place as soon as is practicable. Telecom said it had no immediate comment to the governmen's announcement but would put out a statement later today. Telecom's shares lost around a third of their value in the wake of the original decision in May last year to force a split of the company and to open up its network to rivals. Telecom shares closed yesterday on $4.30 and remain 25 percent below where they were before the announcement, although yesterday one share in every nine was cancelled as part of a capital return related to the sale of its Yellow Pages unit.