Telecom NZ plots sale of fixed-line arm

Nicole McCormick
25 May 2010

Telecom New Zealand could sell a majority stake in its fixed-line network arm Chorus so it can join the government’s Ultra Fast Broadband (UFB) initiative.

Chief executive Paul Reynolds said yesterday that the firm is “undertaking a thorough assessment of the merits of structural separation” since the government’s UFB will “fundamentally reshape the structure of the entire telecommunications industry in New Zealand.”

Telecom NZ can’t be a part of the government’s NZ$3 billion ($2b) UFB project in its current form as both fixed-line infrastructure owner and retail provider.

The company has for the past two years operated its retail and wholesale arms separately, but it has argued against full structural separation.

The WSJreports that TNZ may be able to retain a minority stake in its fixed-line business, Chorus – which comprises around half of the company’s NZ$3.9 billion market capitalization – should it participate in the UFB.

Ratings agency Standard and Poor’s revised TNZ’s long-term debt ratings from stable to negative on news it was considering structurally separating its copper network.

“We consider Telecom New Zealand's vertically integrated business model to be a key driver of the group's strong business risk profile,” Standard & Poor's credit analyst Paul Draffin said. “Accordingly, any separation of the fixed-line access network will have a material negative impact on TCNZ's business risk profile.”

Chorus chief executive Mark Ratcliffe resigned last month to head Telecom's bid to participate in the government's fiber network plan.

The government is investing up to NZ$1.5 billion in open-access, dark-fiber infrastructure to accelerate the rollout of high-speed broadband to 75% of New Zealanders over ten years.

It is essentially a fiber-to-the-premise broadband service that will provide downlink speeds of at least 100Mbps and uplink speeds of at least 50Mbps.

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