Cunliffe rejects Telecom separation plan

Executive incentives need to be revised, says Minister

Communications and information technology minister David Cunliffe has notified Telecom that he will not approve the company's Amended Separation Plan, citing executive incentive payments as a dealbreaker.

“I am declining to approve the Amended Plan that I received from Telecom on 19 December 2007. In accordance with Section 69K of the Telecommunications Act, I have issued Telecom with a Notice of Requirements of further changes needed to their undertakings to finalise the operational separation process,” Cunliffe said in a statement released this morning.

The Minister says he has asked Telecom to provide a "clear upper limit on group-based incentives" to ensure that Wholesale management is encouraged to treat all customers, including Telecom Retail, equally.

“The feedback from submitters has been instrumental in identifying the need for greater clarity to ensure that Telecom’s operational separation will be effective and enduring," Cunliffe says.

In its January submission on the plan, The Telecommunications Users Association of New Zealand (TUANZ) said that to be robust, the operational separation must ensure employees of the separated business units do not retain significant motive and opportunity to place Telecom Group commercial performance above the commercial performance of the separated units.

TUANZ also argued that the Telecom Board and CEO should not have the opportunity to impose Group priorities on the Network Services division or on Wholesale to the detriment of opportunity for other service providers.

"We consider that the revised draft undertaking fails the test on both of these criteria, and that accordingly the Minister ought not to approve it," TUANZ chief Ernie Newman wrote.

Other changes requested include greater clarity around IP interconnection, as well as a range of other technical and definitional matters.

Telecom has until 5.00pm, 25 March to revise its separation plan.

The notice of requirements and further information is here.

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