Stories by Tim Hunter

Mobile termination fees outraged US telcos: Wikileaks cable

American telcos were outraged by high mobile termination fees in New Zealand but lacked confidence in the Commerce Commission's commitment to act on the problem.
Cables from the US Embassy in Wellington published by Wikileaks show there was close interest in termination rates when the commission last examined the issue.
One cable dated July 2004 comments on US company AT&T's complaint of ''exorbitant rates'' to call New Zealand mobile phones.
Vodafone and Telecom charged each other US18-20 cents (NZ27-30c) to terminate calls on their networks, it said.
But ''AT&T reported that the termination charge to it for calls to New Zealand is US23.5c per minute and that TelstraClear is seeking an increase to US30c and Telecom to US25.6c.''
The termination rate could be the most expensive component in mobile phone charges, it said.
When the commission initially said in October 2004 it thought the charges should be regulated, ''the decision was welcome news to AT&T and other US carriers'', said a cable that month.
In a follow-up cable in February 2005, US ambassador Charles Swindells noted US telcos ''have reported excessive fixed-to-mobile termination rates as a barrier to competition in New Zealand''.
However, the outcome of the commission's investigation was unpredictable.
''We expect the Commerce Commission's final decision to be consistent with its draft report, which recommended that mobile termination charges be regulated. However, the commission is fully capable of reversing course.''
As it turned out, the commission didn't reverse, but was over-ruled by the government in 2007, which accepted voluntary cuts proposed by Telecom and Vodafone reducing rates to 14-15c a minute.
After again considering the issue, in February last year the commission recommended further voluntary cuts be accepted, but was ordered to think again by new communications minister Steven Joyce.
Last June it changed its mind and yesterday ordered mobile call termination rates be cut to 4c by April next year.

Yellow to get new online platform

Internet search giant Yahoo7 will develop a new online platform for New Zealand directories publisher Yellow Pages Group in a deal announced in Auckland today.
Yellow CEO Bruce Cotterill said the partnership would allow the company to introduce new services more quickly.
''We acknowledge that the Yellow [online] user experience is not what we want it to be,'' he said. ''But looking forward, for us to make a quantum leap the partnership with Yahoo is the logical way forward.''
Under the deal, Yellow will pay Yahoo to supply a tailor-made technology platform and dedicated support staff.
Yahoo7 CEO Rohan Lund said the arrangement also provided YahooXtra users with direct access to Yellow's database of business advertisers, ''so they can easily find a local business to transact with at the point of inspiration.''
Cotterill declined to reveal how much the services would cost Yellow, but said it would allow the business to build value for shareholders in the medium term.
New website and mobile offerings are expected to be in place next year.
Yahoo7 is a joint venture of US company Yahoo and Australian media group Seven Network.

$1 billion Telecom tax bill may be written off

The Government is understood to be working on legislation to erase a potential $1 billion tax liability for Telecom if the company proceeds with a proposal to split in two.
The issue has arisen as Telecom seeks a way to take part in the Government-subsidised plan to connect high-speed fibre optic broadband to 75 per cent of homes.
The scheme's rules effectively bar Telecom from the $1.5b state subsidy unless it structurally separates into two companies, one owning the retail business and one owning the network business.
While such a move has numerous complications, the tax problem would be a deal breaker.
If Telecom demerges network assets likely to include those currently in its Chorus infrastructure unit the market value ascribed to them would be much higher than their value in Telecom's books after years of depreciation.
This would lead to a clawback by the IRD of past depreciation charges and a giant tax bill for Telecom, with a correspondingly large windfall for the Government.
A research note in July from analyst Greg Main of First NZ Capital estimated the tax liability at up to $1b.
"We assume the Government would waive any potential tax liability related to a demerger of Chorus ... and that any costs of separation ... are offset by benefits from regulatory relief.
"This would leave TEL shareholders with one share in Chorus and one remaining share in TEL."
Without legislation to bypass the tax liability, the economics of structural separation would not stack up for Telecom shareholders.
Telecom declined to comment on the matter, citing confidentiality around negotiations with the Government's Crown Fibre Holdings.
However, a spokesman said "the tax implications of a demerger are subject to the specific way in which a demerger would be enacted and we have not reached that stage.
"Talk of specific numbers is conjecture."
Communications Minister Steven Joyce would not confirm or deny the Government was working on the legislation but said Telecom's proposal for the ultra-fast broadband initiative was being evaluated alongside other bidders through a confidential commercial process.
"Any wider regulatory impacts would be assessed by the Government should they be required,'' he said.
At Telecom's full-year results announcement on August 20, chief financial officer Russ Houlden emphasised proposals for structural separation required a set of issues to be resolved.
"What we've put forward [to the Government] is a package deal.
"You can't just look at the commercial piece or the regulatory piece or the tax piece or the legislation piece in isolation. You need a package."
"If it works for New Zealanders, if it works for government and if it works for shareholders, we need that package to be captured in a heads of agreement.
"Once we've got the package into a heads of agreement then we can kick off all of the necessary streams to work with debt holders, the shareholders, passing legislation and so on."
eIt is understood the Government has made progress on the Leg 5principle of tax relief for Telecom but the details are yet to be worked out.
Although the sum involved could be large, the Government may see tax relief as a technicality because the liability is hypothetical and no money is actually lost to the taxpayer caused mostly by circumstances outside Telecom's control - the depreciation charges from previous years are the result of tax rules.
Telecom would not act to trigger a liability, so it's not money that is actually being lost to the taxpayer if another solution is found. Any solution is likely to be structured to ensure neither shareholders nor the government benefit.
One market source said the Government would want to avoid a demerged Chorus revaluing the network assets and getting a second bite at the depreciation tax benefit cherry.
But the Government's willingness to look at tax relief could indicate its desire for Telecom to stay in the Crown Fibre process, he said.
"If the government does think 'Telecom are at least a credible bidder', which is a given, and 'we do think there is a sensible chance we choose them', which is probably also true, but there is this big hurdle around depreciation, you'd think naturally enough they would have a look at what they could possible do that's not too costly to help them out."

AAPT sale announced by Telecom

Telecom has announced the sale of part of its Australian unit AAPT to iiNet for A$60 million ($75 million), confirming speculation it was unable to conclude its preferred deal to sell the whole company.

Wi-fi venture proving hot stuff

Steve Simms talks the kind of language that gets investors interested. Seated outside a Starbucks cafe in Auckland, one of his latest customers, he offers a prediction: "In the next two to three years we'll be number one in the key markets of a billion [people] plus."

Market Place

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