Regulation behind Telecom NZ split

David Kennedy/ Ovum
01 Nov 2011

Telecom New Zealand shareholders last week voted to structurally separate the parent from its access network business Chorus, moving to separate stock listings.

The operator will move its existing copper and fiber assets, the majority of the telephone exchanges, and network electronics into New Chorus, which will become New Zealand’s primary fixed access wholesale provider. Telecom NZ will retain its mobile assets and retail business, which will be largely unregulated.

In return, the new Chorus will be allowed to participate in the government’s FTTH tender. The alternative was to compete with fiber using Chorus’ FTTN network. This would have fragmented the market and eroded the profitability of both Telecom NZ and the new fiber companies, which is in no one’s interest.

This is the end of a road that began when the New Zealand government imposed a strict “operational” separation on the incumbent carrier back in 2008.

In March 2009, the New Zealand Government has committed itself to spending NZ$1.35 billion ($1.07 billion) for joint ventures to roll out FTTH “ultra-fast broadband” (UFB) to 75% of the New Zealand market by 2019.

The funds will be made available to partnerships between a government-funded corporation and private investors to deploy fiber network infrastructure. Chorus was successful at capturing the majority of this funding through the government’s tender process, but its participation was made conditional on the de-merger of Chorus and its parent.

New Chorus will be responsible for deploying fiber to an estimated 830,900 premises in 24 of the 33 candidate areas across New Zealand, equivalent to approximately 70% of the coverage area of the UFB Initiative. This will leave Chorus as the largest wholesale infrastructure provider in New Zealand. We expect that as Chorus rolls out fiber it will gradually decommission its relatively new FTTN network.

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