WELLINGTON (AFP) — The New Zealand government Monday approved the split of dominant telecommunications carrier Telecom Corp. into three operating arms to improve competition in the sector.
Communications Minister David Cunliffe said the setting up of separate network, wholesale and resale divisions would mean faster and cheaper broadband and phone services for customers.
"Our strategy is to improve market conditions to increase competition, innovation and investment to support New Zealand's transformation to a stronger, more productive knowledge-based economy and society," Cunliffe said.
The government expressed frustration at the slow improvement in broadband services in New Zealand in recent years and proposed a split in Telecom's operating arms as a way of fostering competition.
Cunliffe announced the split last year -- similar to one taken by BT Group (British Telecom) in 2006 -- and ordered Telecom to draw up a plan for the separation.
Telecom, which has been accused of using its dominant position to stifle competition, had one draft separation plan rejected by the government earlier this year but a revised draft submitted last week was accepted.
Under the separation, which takes effect immediately, Telecom will have to provide access to its network to competitors at the same price as its own retail arm.
As part of the deal, Telecom has committed to rolling out a fibre optic network to most of New Zealand by 2012, allowing much faster broadband services.
Telecom chief executive Paul Reynolds said the undertakings were challenging but achievable.
"As a consequence of thousands of hours of conversations, we have a clear understanding of both the words and the spirit of the undertakings," 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.
Telecommunications Users Association of New Zealand chief executive Ernie Newman said the agreement would boost competition, bringing better and cheaper services.
"It is much easier and more secure getting into the telecommunications market in this country from today than before this was all locked in," he told the New Zealand Press Association.
"What it does is remove once and for all the ability of Telecom to use its monopolistic provision to stamp out competition."
Telecom said last year it expected the separation would result in capital spending of 400 million dollars (318 million US) over the next four years, with additional operational costs of up to 40 million dollars a year over the same period.
By the close of Monday trading, Telecom shares were down nine cents at 3.74 dollars on the New Zealand Stock Exchange.
The long-expected separation of Telecom's operating arms has seen about a quarter of the company's market value -- or around 2.3 billion dollars -- wiped out in the last two years.
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