Telecom Corp. selected for prioritised talks on NZ broadband plan
WELLINGTON: Telecom Corp. has been selected for prioritized negotiations by the New Zealand government to deliver the ultra-fast broadband services program in 25 regions, which may lead to a demerger of the company. The regions cover the entire country apart from seven areas already assigned to rivals and an eighth zone where there's another prioritized bidder, Crown Fibre Holdings Ltd. the agency overseeing the process, said in an e-mailed statement. The government is also in prioritized talks with Enable Networks for services in the South Island city of Christchurch and with the Flute joint venture for broadband in Dunedin.
The government is seeking partners for a NZ$1.5 billion ($1.1 billion) nationwide fiberoptic network that will deliver fast Internet to homes and businesses. Telecom, the nation's biggest telephone company, has said it will demerge to create a separate network company to satisfy government requirements.
"It puts Telecom in the box seat in most of the remaining areas," said Guy Hallwright, analyst at Forsyth Barr Ltd. in Auckland. Still "it is only the announcement of a preferred bidder rather than a deal so there's quite a bit of water to go under the bridge." Telecom shares gained as much as 2.9 percent after the report. It rose 2 cents, or 1 percent, to NZ$2.10 at the 5 p.m. market close in Wellington.
Auckland-based Telecom is proposing its Chorus network unit partner with the government, while the remaining sales unit offers services as a structurally separate company.
"We remain firmly of the belief that a structurally separate Chorus as the cornerstone of a national framework for fiber is the most efficient and effective way to deliver the government's vision," Chief Executive Officer Paul Reynolds said in a statement today, welcoming the selection for further talks. Telecom is open to partnership with other owners of fiber assets, including the parties chosen by the government, he said.
"These three parties have provided attractive proposals including a combination of access prices in line with those announced last week, the ability to complete the build within the allocated budget as well as having industry experience and financial strength," Crown Fibre Chairman Simon Allen said.
Communications Minister Steven Joyce is looking forward to receiving recommendations on binding offers in the first quarter of 2011, he said in an emailed statement. -Bloomberg