WELLINGTON (AFP) — The New Zealand government on Wednesday ordered the country's dominant phone company Telecom to split into three units in a bid to level the playing field in the telecommunications industry.
Telecom, long accused of using its dominant position to stifle competition, will have to break up into wholesale, retail and network operations.
It will have to give competitors access to its network linking New Zealand's 4.1 million people at the same price it will charge its own retail arm. The government said the split should be completed by the end of March 2008.
"It will underpin increased competition and efficient investment for the long-term benefit of all New Zealanders," Communications Minister David Cunliffe said.
Incentives for Telecom to develop its network should increase Internet speed and capacity, he said.
The government first signalled it wanted a split last year after it expressed frustration at the slow take-up and expensive charges for broadband Internet.
Competing Internet service providers (ISPs) have complained that Telecom's monopoly position in the network has hindered the introduction of faster and cheaper Internet services.
The government had already ordered Telecom to open up access to its network to competitors and the operational separation is intended to make its network operations more transparent.
The restructuring is similar to the split carried out by BT Group (British Telecom) last year and the New Zealand company's incoming chief executive Paul Reynolds is a British Telecom veteran.
Telecom's chief operating officer for technology and enterprises, Mark Ratcliffe, said the separation would be demanding for the company and the industry.
The company reiterated it expected the separation would result in capital spending of 400 million dollars (297 million US) over the next four years, with operational costs of up to 40 million dollars a year over the same period.
Both Cunliffe and Ratcliffe denied a newspaper report that Telecom had struck an informal deal to sell its fixed-line network as part of the separation.
"We have had discussions with officials to help them to prepare the minister's determination, but we haven't been in any negotiations to sell the network," Ratcliffe said.
Telecommunications Users Association chief executive Ernie Newman said the decision was great news for consumers.
"It's not going to make a difference in the market tomorrow morning, but over time it is going to set up the New Zealand telecommunications market to be on a par or better than those in most parts of the world," he said.
Telecom has little competition in fixed line phone services but international mobile giant Vodafone is the biggest player in New Zealand's mobile communications duopoly, with just over half the market.
Telecom shares dived last year when the government signalled it wanted the operational separation.
But investors welcomed the certainty provided by the final decision, and Telecom shares rose 14 cents to 4.44 dollars by the close of trading.
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