Telecom broadens ultrafast broadband talks

Telecom explores its options with partnership talks

Telecom chief executive Paul Reynolds says the company is talking to other businesses about how it could participate in the Government's $1.5 billion ultrafast broadband investment initiative.

As a retailer of telecommunications services, Telecom cannot acquire a majority stake in local fibre companies charged with rolling out fibre in 33 cities and towns under the scheme.

But there is speculation that it may choose to make its 23,500 kilometres of fibre available to possible investors in local fibre companies, rather than sit on the sidelines.

Reynolds says discussions are taking place within the industry as well as with government officials. The industry had "more to chew on" now the government had made its intent clear.

"I am sure everybody is struggling to work out how to make a good economic investment. Naturally that leads people to think 'is there a way we could partner?', and begin those sorts of discussions to get a better outcome.

"We have no specific partners in mind at the moment, but there are certainly a number of people who we have talked to, and who have come and talked to us."

Analysts say Telecom's latest quarterly result shows just how dependent the company is on the profits of network arm Chorus, and how vulnerable it would be to competing fibre access networks built as a result of the ultrafast broadband plan.

JBWere Goldman Sachs analyst Tristan Joll says Chorus is contributing a significant part of Telecom's earnings.

"Therefore, if there is something out there that exposes those earnings to competition, it creates a challenge and an imperative for them to try and defend it."

Joll says most of the attention has focused on whether Telecom might strike a deal with the government that would allow it to participate fully in the fibre scheme, but there may be other options.

Telecom is saying it is keen to be involved but that the rules do not allow that, and those look unlikely to change, he says.

"It seems to me, why not look around? It is inevitable that a scheme like this will lead to a lot of providers with a lot of assets potentially having to play together."

Reynolds says discussions are taking place through the Telecommunications Industry Group, of which Vodafone, Kordia and Vector are also members, and one-on-one.

He was not in close dialogue with the New Zealand Regional Fibre Group, a collection of lines companies and utilities that has expressed interest in investing in local fibre companies.

"I wouldn't highlight them at all," he says.

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