On November 30, one of New Zealand’s largest companies - and arguably its most complex - will cease to exist in its present form.
Following the shareholders' overwhelming vote in favour of demerging Chorus at Telecom’s annual general meeting yesterday - and assuming the split is approved by the High Court - Telecom will become to be the first incumbent telco in the world to structurally separate. It undertook the demerger, which will come into effect at the end of next month, in order to participate in the government’s Ultra Fast Broadband network.
Prior to the AGM, Telecom CEO Paul Reynolds had presided over 150 presentations explaining the split to shareholders in New Zealand and around the world. Yesterday he described the demerger as enabling a “properly mandated Chorus” and an “unleashed Telecom.”
After the meeting Computerworld asked Reynolds, who will remain as the new Telecom CEO until the end of this financial year, if steering the company towards structural separation was what he signed up for when he moved to New Zealand to take up the role.
“Telecom operates under the most regulated environment in the world and this idea of structural separation has been around in telecomms for years. The first time I looked at it was 15 years ago. When I was considering this job, if you’d to bet which country in the world would go there first, you would bet it would be New Zealand,” Reynolds says.
“It has the most prescriptive regulation. When I took the job in 2007 this was one of the end games.”
The experience he’s gained heading an incumbent telco into voluntary separation is likely to help him land his next role in telecommunications: “These are matters that are going to be important in our industry in other countries going forward, so I think I will have some options as to what I’ll do next but it’s far too early to be choosing or thinking too hard about it,” Reynolds says.
He says wherever his new role is he will retain ties with New Zealand. “I’ll definitely have a foot in New Zealand. Our son’s going to Canterbury University next year. I’ve fallen in love with the country but where the next job might be or what the role is, I don’t know.”
When asked if the new Telecom would rebrand, he said that was a decision for the new board.
Paris in springtime
Departing Telecom chair Wayne Boyd also said a possible name change would be something for the new board to decide but he pointed out that the company’s favorability rating has improved in recent times.
On December 1, Boyd will be out of a job and he is planning an extended European holiday with his wife, with the first destination being “Paris for the spring.”
“I’m going to take six months off. When I get back to New Zealand in August next year, I’ll see what my head space is like.”
Boyd joined the Telecom board in 2004 and took over from Roderick Deane as chair in 2006, shortly after the then-Labour government announced it would legislate to unbundle the local loop and enforce the operational separation of Telecom.
Boyd says operational separation has proven to be a “prelude” to structural separation. “We’ve been able to do this demerger in an extraordinary short period of time and I think we’ve been able to do that because we had operational separation in place, it was a step,” he says.
Boyd’s role in the changes was acknowledged by the Shareholders Association chairman John Hawkins, who was the only member of the audience to speak during yesterday’s AGM. Hawkins made two observations – firstly that recent gains by Telecom came from a “low starting point” and secondly that Boyd has been a worthy chair.
Afterwards he told Computerworld that Boyd had played a significant role in ensuring that Telecom is part of the Ultra Fast Broadband network. “Because he tends to be in the background a bit I’m not sure that’s been as well known as perhaps it should be.”
So what does Hawkins think about Paul Reynolds’ stewardship?
“I’m not sure it’s a job too many people would have wanted. It’s very, very complex. I’m not aware of such a level of complexity in any company. Such a mix of regulatory, legal and commercial pressures, many of which are competing with each other.”
Computerworld asked Hawkins to rate Reynolds’ performance out of ten, but he said that would be too simplistic.
He also says that the Shareholders Association understands the company is conducting an internal and international search for Reynolds’s replacement and that the Association is always in favour of “succession from within”.
He praised the composition of the two new boards for Chorus and Telecom, and singled out the appointment of Mark Verbiest as the chair of new Telecom. Computerworld asked if it might be a return to the old, as Verbiest was Telecom’s general counsel during Theresa Gattung’s tenure as chief executive.
“No, there’s been a lot of water under the bridge since then. Mark has always been an independent thinker and there’s been a sea change in the whole situation since then. I don’t think we’ll see any return to similar processes that were perhaps followed under Roderick Deane and more latterly Theresa Gattung.”
No changes at Chorus
Another senior Telecom executive from the Gattung era is Mark Ratcliffe. He has remained with the company throughout operational separation and will become CEO of the stand-alone Chorus on December 1.
Ratcliffe says they will retain the brand Chorus. “People seem to have embraced it and why would you change something that seems to be working?” he told Computerworld.
Also remaining in place will be the four large vendor contracts Chorus has with its technology partner Alcatel-Lucent and its field services partners Transfield, Downer and Visionstream.
Ratcliffe says Chorus is working with the three Local Fibre Cos that have been set up to roll out the 30 percent of UFB. “We’re having positive conversations with Enable and WEL Networks and Northpower about how we can assist them with their objectives,” he says. “It might be a partnership or it might be a customer/supplier relationship.”
Ratcliffe says he attended around half of the 150 presentations made to shareholders about the demerger prior to the AGM.
“One thing that was really surprising was that all investors just focused on what the companies were going to look like after demerger and there was no question really around should we demerge. I think we all thought we’d get some of that. I think most people are looking forward," he says.