Telecom rejects TUANZ claim of gross lack of investment

Company claims OECD statistics are out of date

Telecom has refuted user group TUANZ’s criticism that it is under-investing in — and making excess profits from — the New Zealand market, saying TUANZ’s figures are out-of-date.

TUANZ boss Ernie Newman today slammed Telecom for under-investment as yet another OECD report put New Zealand at the tail-end of investment in critical infrastructure.

“It is no wonder our telecommunications infrastructure is creaking at the seams and New Zealanders are being denied the basic services required to be full participants in a modern-day economy,” Newman said in a statement, after analysing an OECD update report.

The report shows New Zealand spends a higher percentage of its national income on telecommunications than any other developed country and that Telecom is one of the world’s most profitable phone companies. It also shows the proportion of revenue the telecommunications sector invests is barely half that of the OECD average and services are sub-standard.

“According to the OECD, telecommunications revenue in New Zealand is 5.39% of GDP, the highest of any of the 30 OECD countries,” Newman said. “The OECD average is around 3%.

“Meanwhile, Telecom NZ is among the world’s most profitable telecommunications companies, with its dividend having traditionally been around four times the industry average. These facts show that the industry in New Zealand is anything but struggling."

The report shows that in the developed world the telecommunications sector reinvests 15.3% of revenue, but New Zealand is third lowest on this measure, with investment of just 8.7%. Australia, Canada and the United States invest around twice as much in proportion to revenue as does New Zealand while Britain invests three times as much.

“Given that major investments have been made in mobile services over recent years, it is clear that the big difference is in the failure to maintain appropriate re-investment levels for fixed-line services," Newman said.

However, Telecom says the report Newman refers to is based on 2005 figures. Telecom spokesman Brett Jackson says the company has been investing increasing amounts in its New Zealand operations in recent years.

Capital expenditure increased from $507 million, in 2004, to $585 million, in 2005, and to $620 million in 2006. The 2007 forecast capital expenditure is $683 million, he says.

This means Telecom’s reinvestment rate for the year to 30 June 2006 was 13.7%, based on New Zealand capex of $620 million and operating revenues of $4,511 million, Jackson says. Telecom’s reinvestment rate for the year to 30 June 2005 was 13.5%, based on capex of $585m and operating revenues of $4,340 million.

Newman said Telecom's Next Generation Network had been promised since around 2000 and had still not been delivered.

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