New rural levy hits Telecom NZ

Nicole McCormick
17 Mar 2010

Telecom New Zealand’s shares have fallen to an all-time low in the wake of the release of the government’s rural broadband plan.

Under the NZ$300 million ($214m) Rural Broadband Initiative, the communications minister Steven Joyce said he aims to deliver fiber-to-the-premise services to 97% of rural households and 97% of schools.

To help fund the plan, the government has confirmed it will impose a Telecommunications Development Levy on the industry worth NZ$252 million ($179.4 million).

The government will tip an additional NZ$48 million into the pot.

Incumbent Telecom NZ will have to foot approximately 66% of the industry levy or around NZ$28 million per annum.

In addition, it will lose its current industry subsidy of around NZ$22 million per year to supply fixed-line services to rural areas, as New Zealand’s cabinet agreed on Monday to amend the Telecom Services Obligation which funds uneconomic telecom services.

Telecom NZ estimated its ebitda for 2011, 2012 and 2013 “will be adversely impacted by up to NZ$56 million,” if the Telecommunications Development Levy and TSO amendments were enacted.

Telecom NZ shares fell NZ9 cents in trading today to close at NZ$7.75.

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