Telecom New Zealand

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Telecom New Zealand

Type	Public
Predecessor	New Zealand Post Office
Founded	1987
Headquarters	Wellington, New Zealand Auckland, New Zealand [1]
Area served	New Zealand, Australia
Key people	Wayne Boyd, Chairman[2] Dr Paul Reynolds, CEO Mark Ratcliffe, CEO Chorus[3] Matt Crockett, CEO Telecom Wholesale[4] Russ Houlden, CFO
Industry	Telecommunications
Products	Telecom landline Telecom Mobile XT Network Xtra
Services	Fixed Telephony Mobile Telephony Internet Access Leased Lines Data Transmission
Revenue	▲ NZ$5,673,000,000 (2008)[5]
Operating income	▼ NZ$975,000,000 (2008)[5]
Profit	▼ NZ$713,000,000 (2008)[5]
Total assets	NZ$7,405,000,000 (2008)[5]
Total equity	NZ$2,736,000,000 (2008)[5]
Employees	6,500+ (New Zealand) 2,000 (Australia)
Divisions	Telecom Retail Telecom Wholesale AAPT Gen-i Chorus
Website	telecom.co.nz

Telecom New Zealand (NZX: TEL, ASX: TEL, NYSE: NZT) is a Wellington, New Zealand-based telephone company and, through its subdivision Xtra, an internet service provider. It has been run as a publicly-traded private company since 1990. It is also New Zealand's second largest mobile operator. Telecom is the largest company by value on the New Zealand Exchange (NZX) and movements in its share price have a great influence on the index of movements in the top 50 companies. Further, it is the 39th largest telecommunications company in the OECD.^[6]

Telecom was formed in 1987 from a division of the New Zealand Post Office and privatised in 1990. The selling price is still considered by many to be extremely low, given that Telecom had a monopoly of all phone lines in New Zealand at the time.^{[citation needed]} Some consider that the decision to privatise Telecom was a mistake and that it would have been better to keep Telecom as a government entity.^{[citation needed]} Others consider that the capital requirements to modernise the network were better provided by private enterprise than the government.^{[citation needed]}

On 31 March 2008, Telecom was operationally separated into three divisions under local loop unbundling initiatives by central government – Telecom Retail; Telecom Wholesale; and Chorus, the network infrastructure division.

Contents 1 History 1.1 1980s 1.2 1990s 1.3 2000s 2 Xtra 3 Telecom Mobile 3.1 Customer numbers and market share 4 Criticism 4.1 Effects of monopoly 4.2 Telecom’s response 4.3 Calls for change 5 Local loop unbundling 6 References 7 External links

[edit] History

[edit] 1980s

1987

• The New Zealand Post Office divests itself of the newly created Telecom which was created as a state-owned enterprise (SOE) on March 31, 1987.
• The Government-owned Telecom Corporation is to have a commercial focus. It purchases telecommunications assets of the Post Office for NZ$3.2 billion and work begins on improving the services and network.
• Telecom launches its 025 mobile network and TDMA mobile data network. The New Zealand telecommunications market is progressively deregulated.

[edit] 1990s

1990

• Telecom is sold to two United States-based telecommunications companies, Bell Atlantic and Ameritech, for NZ$4.25 billion.[1]

• Clear Communications (now TelstraClear) begins the first network to compete with Telecom.

• The Kiwi Share agreement is drawn up and part of this agreement retains free local calling for residential customers.

1991

• Telecom lists on the New Zealand, Australian and New York stock exchanges.

1992

• Roderick Deane is appointed CEO.
• Telecom implements a NZ$200 million dollar fibre-optic cable connection between Australia and New Zealand.

1993

• Ameritech and Bell Atlantic reduce their share in Telecom to a combined 49.6%.
• BellSouth (now Vodafone) sets up the first mobile network to compete with Telecom.

1995

• Clear Communications reaches an agreement on local service interconnection.
• Telecom creates First Media Ltd to develop a cable television network across Auckland and Wellington, called First TV.

1996

• Telecom establishes a telephone exchange in the United States for international traffic.
• Telstra New Zealand Limited (now TelstraClear) sets up operations in the New Zealand business market.
• Telecom launches Xtra, which is New Zealand's largest internet service provider today.

1997

• Saturn Communications Limited (now TelstraClear) enters the residential phone market in Wellington.
• Telecom buys back NZ$1 million of its shares.

1998

• Ameritech sells down its 24.8% shareholding in an international public offering.
• Bell Atlantic issues exchangeable notes that are convertible into the Telecom shares that it owns.
• Telecom celebrates 500,000 mobile customers connected to its mobile network.
• Southern Cross Cables Limited, half owned by Telecom, announces plans to build a fibre-optic cable linking New Zealand with Australia and North America.
• Vodafone New Zealand buys BellSouth and starts a campaign to attract Telecom customers to its network.

1999

• Telecom establishes a presence in Australia, buying 78% of AAPT, Australia's third-largest telecommunication company.
• Telecom upgrades its nationwide payphone network to smart card technology.
• Telecom's broadband Internet service based on ADSL technology, called JetStream, is launched and rolled-out progressively in local exchanges.
• Telecom begins charging customers who connect to the Internet using a local dial up number forcing all ISPs in New Zealand to change to an 0867 dial up number. Many consumers complain that this is in breach of Telecom's Kiwishare Agreement where residential customers are allowed free local calling.
• Theresa Gattung is appointed CEO of Telecom, with Rod Deane moving to the position of chairman.

[edit] 2000s

2000

• Xtra signs up its 300,000th customer.
• Telecom Mobile, the mobile division of Telecom, celebrates 1,000,000 customers connected to its mobile network.
• The New Zealand Government conducts a comprehensive review of the regulatory regime.
• Telecom raises its AAPT shareholding to 100%.
• Telstra merges New Zealand operations with Saturn to form TelstraSaturn Limited.

2001

• The Government passes the Telecommunications Act, setting up a Telecommunications Commissioner.
• Telstra buys Clear Communications to form TelstraClear.

2004

• Telecom won the Roger Award for The Worst Transnational Corporation operating in New Zealand.

2005

• Telecom releases Bitstream, a 256kbit ADSL service sold at wholesale prices (at approximately 10% below the retail price) to other ISPs.
• Telecom's mobile customers find out that their privacy and security is not safe on the Telecom network, when a phreaker named ^god releases an exploit to the media allowing access to almost anyone's voicemail.
• Telecom posts a profit of NZ$916 million.
• Telecom's online retail store Ferrit launches with about 150 retailers.^[7]

2006

• May 3: The New Zealand Government announces that it will require Telecom to unbundle the local loop to provide "access to fast, competitively priced broadband internet".[2]
• May 4: NZ$1.1 billion of its market capitalisation was wiped off following the announcement. [3]
• May 9: An audio clip recorded on March 2 was released involving Telecom CEO Theresa Gattung admitting the use of confusion as a chief marketing tool in the industry. The March recording also dismissed the New Zealand Government as "too smart to do anything dumb" with regards to regulation. [4]
• May 19: A video titled "Telecon" incorporating the May 9 audio clip and a dubbed Telecom ad was released. Telecom got it removed from YouTube but it is still available at other locations. [5] Telecon commercial
• Late May: Roderick Deane resigns as chairman, and is replaced by Wayne Boyd the following month.
• June 27: Telecom announces it will voluntarily separate its business into two operating entities - Wholesale and Retail. [6]
• July: Matt Crockett is appointed CEO of Telecom's Wholesale division. [7]
• November 28: The Telecommunications Amendment Bill is introduced to split Telecom into three business units, with network access separated from the wholesale and retail units. ^[8]

2007

• January 16: The Librarians Association of New Zealand put in a complaint about a Telecom advertisement where 3 young school children state that, "Only dumb kids read books, brainy kids have broadband." Originally Telecom stated that is the views of the young children and not Telecom and the advertisement was unscripted, later that week Telecom choose to edit the advertisement to remove the comments made by the children.^{[citation needed]}
• January 19: It is reported that Paritai Drive, Orakei, one of the richest streets in Auckland, is still not capable of receiving a broadband DSL service and there are many other well populated areas around New Zealand still not capable of receiving broadband. Opposition Woosh Wireless immediately tested their service in the area and gave residents the opportunity to join their wireless broadband service. [8] [9]
• February 2: Telecom announces Director and CEO Theresa Gattung will be stepping down effective 30 June 2007 and a search for a new CEO will begin immediately.^[9]
• February 5: Telecom announces that from March 2007 they will begin rolling out ADSL2+, more than a year after originally stated for roll out.
• March 31: The 025 D-AMPS cellular network is closed down.^[10]
• April 1: All New Zealand telecommunications providers including Telecom introduce number portability.
• May 2007: British Telecom have been in discussion with the New Zealand government regarding Telecom's monopoly control of the NZ broadband network. Three to four years previously, British Telecom were in a similar position to that which NZ Telecom are now in; the British broadband network has since been broken up and the NZ government are keen to learn and possibly copy the development/regulatory/investment model used by the British firm.
• The Auckland Chamber of Commerce has publicly stated that if Telecom do not invest in a next-generation high-speed network, comparable with that of other Western nations, they will fund a private fibre-optic based service in the 100 megabit speed range. The proposed coverage of this would be within 200m of a path running south from Auckland CBD (situated to allow as many businesses as possible to connect). Any company or private individual within this range would be offered a connection.
• June 8: Telecom Mobile announces a plan to build a hybrid W-CDMA/UMTS-CDMA network [10], based on the WCDMA HSPA technology, to eventually replace its current CDMA EV-DO network. This network will go online by the end of 2008.
• June 28: Telecom announces that Dr Paul Reynolds, CEO of BT Wholesale, has been selected as the new CEO, to commence on 27 September.^[11] Simon Moutter was appointed as acting CEO in the interim.^[12]
• June 30: Theresa Gattung steps down with a reported leaving payment of $5.125 million in cash and 12 weeks annual leave owing.^[13]
• September 27: Dr Paul Reynolds commences as CEO of Telecom.
• November 21: Mark Ratcliffe, Chief Operating Officer for Technology, is appointed CEO of Telecom's soon-to-be spun-off network division.

2008

• January 16: Telecom announces the formation of Chorus, its new network infrastructure division. [11] [12]
• March 31: Telecom officially separates into three divisions (Chorus, Telecom Wholesale, Telecom Retail)
• April 1: Russ Houlden, a colleague of Reynolds at BT, is appointed Chief Financial Officer. He replaces Marko Bogoievski, who joined Infratil.

2009

• January 12: Telecom announces the closure of its online retail store Ferrit.^[7]
• May 29: Telecom launches its UMTS 850mhz network, XT Mobile Network, to the public.^[14]

[edit] Xtra

[edit] Telecom Mobile

Telecom Mobile is New Zealand's second-largest mobile operator, with less than 50% of market-share, slightly behind Vodafone.^[15] Telecom used to operate AMPS, Digital D-AMPS/TDMA and currently operates CDMA2000. AMPS and D-AMPS service was sold under the 025 brand and CDMA services are sold under the 027 brand. Telecom turned off the 025 network on 31 March 2007 [13]. Most of its customers had migrated to the 027 network. The 027 CDMA EV-DO network is marketed as T3G, a 2 MB third-generation mobile system.

On the 8 June 2007, Telecom announced a plan to build a hybrid W-CDMA/UMTS-CDMA network [14], to be called XT Mobile Network, based on the WCDMA HSPA technology, to replace its current CDMA EV-DO network. The network was launched on 30 May 2009 running at 850 MHz with some 3G 2100 MHz for extra coverage in urban areas. Telstra's Next G (in Australia) and AT&T Wireless also have networks running on 850 MHz, which can cover greater geographic distances and penetrate buildings more effectively than higher frequencies. Current CDMA phones are guaranteed by Telecom to work until at least June 2012. The Telecom UMTS network is planned to have no GSM coverage, no roaming coverage for 2G phones. Foreign 850MHz (North American) UMTS handsets can roam to this network, 2100MHz (European) handsets would have limited coverage.

[edit] Customer numbers and market share

The following shows customer numbers and market share information for Telecom Mobile, including both the now-shut-down 025 network and current 027 network customers (these refer to Telecom Mobile's numbers starting with 025 and 027). Since Vodafone New Zealand took over BellSouth in the late 1990s Telecom's market share has dropped every year.

In 2005 Telecom launched New Zealand's first 3G network, using the brand name T3G. Being first into the 3G market, along with aggressive marketing and a $10 a month text message package, has allowed Telecom to claw back some market share from Vodafone. In November 2005 Telecom reported 72,000 new mobile phone customers, compared to 27,000 for Vodafone.

Quarter	No of customers	Market share %
December 1999	858,000	68.37%
December 2000	1,150,000	60.43%
December 2001	1,379,000	56.94%
December 2002	1,229,000	50.18%
December 2003	1,298,000	49.95%
March 2005	1,520,000 (approx)	44.6%
November 2005	1,600,000	46%
March 2007	1,900,000	49%

[edit] Criticism

While there are now many competitors in the cellular, toll-call and internet markets, Telecom continues to be criticised for using its status as a former general monopoly to charge high prices whilst providing, in some people's opinion, poor service; On XTRA Broadband it used to cost over $1200 to download 100GB of data in a month, plus monthly access fees (at residential rates, business was more expensive). Prices have since dropped as competition in the broadband market becomes stronger. The unlimited plans have since been removed as Telecom found it was unable to deliver the speeds promised. Traffic management was meant to be applied over Peer-to-Peer and related traffic, but was instead implemented over all traffic. It has proved difficult for other companies to establish residential services due to Telecom’s former control of local loop services. Telecom has also leveraged its control of residential services to establish the country’s largest ISP, Xtra.

Competitors have alleged that Telecom engages in unfair practices to prevent them from gaining ground, for example by reselling broadband capacity to Xtra at lower prices than to other ISPs.

In July 2005, two dozen Internet service providers formally complained to New Zealand's Commerce Commission via a letter. [15] Notably absent from the list of signatories were Telecom’s ISP, Xtra, and several ISPs owned by its main competitor, TelstraClear.

On February 1, 2007 the Consumers' Institute gave its "supreme ass award" for bad products to Telecom for its Xtra broadband service, Consumers Institute executive director David Russell claimed that since Telecom "unleashed" its broadband speeds, the institute had been "inundated with complaints of slower speeds and frustrating cutouts".^[16]

Telecom has been given the Roger Award more than once, in 2004 and 2007 - and only the second company awarded as such, with the defunct TranzRail being the first. [16]

[edit] Effects of monopoly

The New Zealand Treasury once estimated the economic loss from Telecom's (now former) monopoly to be in the region of $50–$250 million a year. Another study commissioned in 1998 by competitor Clear (now TelstraClear) estimated that the loss was $400 million a year. At a retail level Telecom now faces competition in all areas - cellular, internet, toll-calls and, subject to ongoing developments, in local calling. At a network level these retail services often resell Telecom wholesale products.

[edit] Telecom’s response

In an article published on 25 October 2005, Telecom claimed one reason for poor broadband uptake in New Zealand was because of the fact New Zealand residential subscribers enjoy free local calling. Telecom stated “customers have the option of moving to faster broadband services, but free local calling creates a disincentive by allowing them to use dial-up for as long they want” (i.e. they do not have to pay a per-minute call charge while using dial-up, unlike many other countries where local calls are charged for). However, some internet experts and competitors disagreed and even the secretary of the OECD took a shot at Telecom.

[edit] Calls for change

Telecom failed to reach their self imposed goal of around 83,333 wholesale broadband customers by the end of 2005. During her opening address to parliament, Prime Minister Helen Clark criticised the state of the internet in New Zealand ^[17]. This was followed by extensive criticism in the media such as in two high profile television programmes, in two episodes of Campbell Live (whose past major sponsors include Telecom), during which CEO Theresa Gattung was challenged by host John Campbell, and an episode of the New Zealand edition of Sunday. Critical articles had been published by various magazines and newspapers, including the largest newspaper, the New Zealand Herald. Of significance, many of these were lengthy and high profile articles compared to many previous articles critical of Telecom — among the most noticeable of these was published by the National Business Review, in which it was stated that “Far from being ‘Xtraordinary’, as its multimillion dollar advertising would have you believe, Telecom is strangling the nation’s advancement.". While in Wellington for an ICANN meeting, Vint Cerf was reported to have made a personal visit to David Cunliffe, the telecommunications minister where it is believed he recommended that Telecom be unbundled ^{[18] [19]}. The New Zealand Government investigated whether it needed to force Telecom to unbundle the network, thereby allowing other companies access and improving broadband service for consumers.

[edit] Local loop unbundling

In a decision by the New Zealand Government on May 3, 2006, Telecom was forced to unbundle the local loop. This will allow competitors (such as TelstraClear, Orcon and Ihug) to offer broadband and other communications services throughout New Zealand by installing their own equipment in exchanges. ^{[20] [21]} The announcement of this decision was rushed ahead of schedule, as the documents were leaked to Telecom who advised the government of the leak. It was widely reported that the government had intended to make the announcement during the 2006 Budget. Most of Telecom's competitors and many independent commentators such as InternetNZ and Paul Budde applauded the decision, with opposition to unbundling coming from the Business Roundtable, Federated Farmers, and Bruce Sheppard (representing Telecom shareholders). Legislation was introduced to enable the regulatory changes. Three other political parties, New Zealand First ^[22], the Green Party ^[23] and United Future ^[24] all supported the decision which would give the government at least 66 votes if there were no votes against the party line. The main opposition National Party initially opposed the unbundling decision, but later voted in favour of it after a select committee hearing. This left the ACT Party alone in opposing the decision.

Following the events of May 2006 the company was hit by a series of other decisions. Firstly, the Commerce Commission announced that it would rule on the contentious issue of mobile telephone termination charges. Then, in early-June, the Commission announced that calls between a landline and a mobile phone within a geographically defined boundary could be connected free of termination charges. The ruling allows Vodafone to establish a mobile phone product which can also provide free local calling, in direct competition with a product for which Telecom has long had a monopoly (The government, when it sold Telecom, enshrined free residential local calling as something it must continue with). Then, the Commerce Commission granted two of Telecom's competitors, CallPlus and ihug, access to an unrestricted, Unbundled Bitstream Service, which would allow them to provide competitive broadband services.

Finally, the company announced the voluntary separation of its business into two separate entities - Wholesale and Retail ^[25]

The Government introduced the Telecommunications Amendment Bill in November 2006 to force Telecom to open its network to competitors. The bill officially split Telecom into three business units from 31 March 2008, with network access separated from the wholesale and retail units. ^[8]

[edit] References

[edit] External links

• Telecom New Zealand Website
• YahooXtra
• Chorus - A Telecom New Zealand Company
• Yahoo! - Telecom Corporation of New Zealand Limited Company Profile
• Telecon - Telecom Parody

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