Telecom New Zealand
|Traded as||NZX: TEL
|Predecessor(s)||New Zealand Post Office|
|Headquarters||Wellington, New Zealand
Auckland, New Zealand
|Area served||New Zealand, Australia|
|Key people||Mark Verbiest, Chairman
Simon Moutter, CEO
Nick Olson, CFO
|Operating income||NZ$277,000,000 (2011)|
|Total assets||NZ$6,392,000,000 (2011)|
|Total equity||NZ$2,311,000,000 (2011)|
AAPT Consumer owned by iiNet
Chorus (until 30 November 2011)
Telecom New Zealand is a New Zealand-wide communications service provider (CSP), providing fixed line telephone services, a mobile network, an internet service provider (through its subsidiary Xtra), and a major ICT provider to NZ businesses (through its Gen-i division). It has operated as a publicly traded company since 1990.
Telecom was formed in 1987 from a division of the New Zealand Post Office and privatised in 1990. The selling price was considered by some to be extremely low, given that Telecom had a monopoly of all phone lines in New Zealand at the time. There has been debate as to whether privatisation was in the best interests of the country's telecommunications infrastructure, although others consider that the capital requirements to modernise the network were better provided by private enterprise than the government.
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. This separation effectively ended any remnants of monopoly that Telecom Retail once had in the market. On 30 November 2011 the demerger process was complete, with Telecom and Chorus becoming separate listed companies.
In February 2014, the telecommunications company announced that it will change its name to 'Spark' later in the year to better reflect the company's new direction and the aspirations it has. The change will cost an estimated NZ$20 million.
The Postal Services Act 1987 split the then New Zealand Post Office into New Zealand Post Limited (trading as NZPost), Telecom New Zealand Limited (trading as Telecom) and Post Office Bank Limited (trading as PostBank, sold to ANZ in 1989) and all three industries progressively deregulated.
In 1990, Telecom was sold to two United States-based telecommunications companies, Bell Atlantic and Ameritech, for NZ$4.25 billion. Around the same time, the Kiwi Share agreement was drawn up, which included a provision that the company retained free local calling for residential customers. Also in 1990, Clear Communications (now TelstraClear) entered the New Zealand telecommunications market and so was the first network to compete with Telecom.
In 1991, Telecom listed on the New Zealand, Australian and New York stock exchanges. The following year Telecom implemented a NZ$200 million fibre-optic cable connection between Australia and New Zealand. Also in this year, Roderick Deane was appointed CEO of the company. Then in 1993 Ameritech and Bell Atlantic reduced their share in Telecom to a combined 49.6% and BellSouth New Zealand Limited (BellSouth), subsequently acquired by Vodafone, set up the first mobile network to compete with Telecom.
Clear Communications reached an agreement with Telecom in 1995 on local service interconnection. Also in 1995 Telecom created First Media Ltd to develop a cable television network across Auckland and Wellington, called First TV. In 1996 Telecom established a telephone exchange in the United States for international traffic, and launched Xtra, which is New Zealand's largest internet service provider today.
1997 saw Telecom buy back NZ$1 million of its shares. The following year, Ameritech sold down its 24.8% shareholding in an international public offering, and Bell Atlantic issued exchangeable notes that were convertible into the Telecom shares that it owned. Also in 1998, Telecom celebrated 500,000 mobile customers connected to its mobile network, Southern Cross Cables Limited (half owned by Telecom) announced plans to build a fibre-optic cable linking New Zealand with Australia and North America, and Vodafone New Zealand bought BellSouth and started a campaign to attract Telecom customers to its network.
In 1999, Telecom established a presence in Australia, buying 78% of AAPT, Australia's third-largest telecommunications company. Telecom upgraded its nationwide payphone network to smart card technology. Telecom's broadband Internet service based on ADSL technology, called JetStream, was launched and rolled-out progressively in local exchanges. Also at this time, Telecom began charging customers who connected to the Internet using a local dial up number, forcing all ISPs in New Zealand to change to an 0867 dial up number. This resulted in complaints that this was in breach of Telecom's Kiwishare Agreement where residential customers are allowed free local calling. The decade was rounded off with Theresa Gattung being appointed new CEO of Telecom, with Rod Deane moving to the position of chairman.
- Xtra signs up its 300,000th customer.
- Telecom Mobile, the mobile division of Telecom, celebrates 1,000,000 customers connected to its mobile network.
- Telecom raises its AAPT shareholding to 100%.
- Telecom purchases Gen-i Ltd (May).
- Telecom purchases Computerland Ltd (September).
- Telecom won the Roger Award for The Worst Transnational Corporation operating in New Zealand.
- Telecom introduces Bitstream, a 256 kbit 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.
- 9 May: An audio clip recorded on 2 March 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.
- Late May: Roderick Deane resigns as chairman, and is replaced by Wayne Boyd the following month.
- July: Matt Crockett is appointed CEO of Telecom's newly formed Wholesale division.
- 16 January: 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.
- 19 January: 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.
- 5 February: Telecom announces that from March 2007 they will begin rolling out ADSL2+, more than a year after originally stated for roll out.
- 31 March: The 025 D-AMPS ("TDMA") cellular network is closed down.
- 1 April: 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.
- 8 June: Telecom Mobile announces a plan to build a hybrid W-CDMA/UMTS-CDMA network, 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.
- 28 June: Telecom announces that Dr Paul Reynolds, CEO of BT Wholesale, has been selected as the new CEO, to commence on 27 September. Simon Moutter was appointed as acting CEO in the interim.
- 30 June: Theresa Gattung steps down as CEO, with a reported leaving payment of $5.125 million.
- 27 September: Dr Paul Reynolds commences as CEO of Telecom.
- 21 November: Mark Ratcliffe, Chief Operating Officer for Technology, is appointed CEO of Telecom's soon-to-be spun off network division.
- 16 January: Telecom announces the formation of Chorus, its new network infrastructure division.
- 31 March: Telecom officially separates into three divisions (Chorus, Telecom Wholesale, Telecom Retail)
- 1 April: Russ Houlden, a colleague of Reynolds at BT, is appointed Chief Financial Officer. He replaces Marko Bogoievski, who joined Infratil.
- 12 January: Telecom announces the closure of its online retail store Ferrit.
- 29 May: Telecom launches its UMTS 850 MHz network, branded as XT, to the public.
- August: An industrial dispute emerges between Chorus and the Engineering, Printing and Manufacturing Union after servicing contracts in the Auckland & Northland regions are awarded to Australian company Visionstream, which has planned to change technicians' employment contracts to a dependent contractor model.
- 16 October: New logo announced
- December: Telecoms new mobile phone network XT Mobile Network from Taupo south fails the first in a series of failures due to a Radio Network Controller failure in Christchurch
- February: Second major network outage for Telecoms XT Mobile Network caused by failing Radio Network Controller in Christchurch.
- 27 April: Telecom releases first Android (operating system) handset on the XT Mobile Network the LG GW620
- November: Telecom moves into its newly built world HQ on Victoria St in the Auckland CBD. Costing the developer $280 million it will consist of 2700 staff and be the largest corporate move in NZ history.
- 14 February: Fairfax Media's Dominion Post reports that Telecom is under investigation by the Department of Internal Affairs' (DIA) anti-spam unit, following complaints about text messages sent to customers. The messages in question failed to feature the require 'opt-out' (unsubscribe) information. Telecom argued that such information was no longer required, having sent a text in late November, telling recipients that unless they objected then, Telecom would deem they had agreed future text messages from the company need no longer include an opt-out message. Victoria University of Wellington law student, Hamish McConnochie, brought the text messages to the attention of media, citing Telecom's messages as not meeting the threshold for an arrangement under the Act. McConnochie later appeared on the TVNZ 7 show, Back Benches to discuss the matter.
- 24 May: Crown Fibre Holdings announce that Telecom has been successful in partnering with the Government to build a fibre network.
- 9 June: The National Business Review reveals that in OIA documents, sought by Victoria student Hamish McConnochie, the DIA considered at least one text message sent by Telecom to be in breach of the Unsolicited Electronic Messages Act 2007.
- 1 July: Telecom announce a shutdown date of 31 July 2012 for their CDMA Cellular network.
- 1 December: Telecom divests itself of Chorus, the Network Infrastructure division, in a one for five share deal, with Chorus becoming a separately listed company.
- 31 July: The Telecom CDMA network is closed down.
- 6 September: Telecom officially launches new Ultra Mobile branding and plans. These plans include a free 4G upgrade (4G was made available later in November 2013) with a 1GB of data per day from Telecom WiFi hotspots.
- 4 October: Telecom seeks clearance to acquire management rights for parts of the 700 MHz spectrum with the intention of aiding in the development of its 4G mobile network.
- 9 December: Telecom announces sale of AAPT for A$450 million
- 21 February: Telecom announces a name change to 'Spark', to take effect by August 2014 to better reflect the company's new direction and aspirations.
Industry regulation and company restructuring
In 2000, the New Zealand Government conducted a comprehensive review of the regulatory regime in the telecommunications industry. Subsequently, in 2001 the Telecommunications Act was passed, which among other things established the role of a Telecommunications Commissioner.
In a decision by the Government on 3 May 2006, Telecom was forced to unbundle the local loop, to provide "access to fast, competitively priced broadband internet". The decision significantly affected the company's market share, and allowed competitors (such as TelstraClear, Orcon and Ihug) to offer broadband and other communications services throughout New Zealand by installing their own equipment in exchanges. 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, the Green Party and United Future) 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.
The company was then affected by a series of other government decisions. Firstly, in early-June 2006 the Commerce Commission ruled on the contentious issue of mobile telephone termination charges, announcing that calls between a landline and a mobile phone within a geographically defined boundary could be connected free of termination charges. This ruling allowed Vodafone New Zealand to establish a mobile phone product which could also provide free local calling. 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.
On 27 June 2006, the company announced that it would voluntarily separate its business into two separate operating business units — Wholesale and Retail. 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.
On 28 March 2013, Telecom announced that it would reduce staff levels by constraint on recruitment activity and redundancies. This followed from speculation by MP Clare Curran that up to 1500 jobs would be cut from the company.
Telecom is New Zealand's largest Internet Service Provider. It was formerly named Xtra until Telecom rebranded it under their own name. The next largest ISP in the New Zealand market is Vodafone NZ, a title acquired when it purchased TelstraClear in 2012.
Telecom Mobile is New Zealand's second-largest mobile operator by market-share, behind Vodafone. Telecom primary mobile network is called "XT", and operates at 850 MHz nationwide (with some 2100 MHz overlay in urban areas), and delivers 3G data connectivity wherever there is coverage.
Telecom originally operated a TDMA (AMPS, Digital D-AMPS/TDMA) mobile network; this was superseded by its CDMA network. The TDMA network was turned off on 31 March 2007, and most of its customers migrated to CDMA. The CDMA EV-DO network was marketed as T3G, a 2 MB third-generation mobile system. Telecom announced on 8 June 2007 the intention to build a W-CDMA/UMTS network, to be called XT Mobile Network, based on WCDMA HSPA technology, to replace its current CDMA EV-DO network. The network was launched on 29 May 2009. The specifications of XT were chosen to bring it into line with a number of other networks in overseas territories, such as Telstra's Next G (in Australia); furthermore, 850 MHz services can cover greater geographic distances and penetrate buildings more effectively than higher frequencies. The CDMA network ran in parallel with XT until it was shut down on 31 July 2012.
The TDMA network used the 025 mobile prefix, using a mixture of six- and seven-digit subscriber numbers. With the switch to CDMA, Telecom migrated to the 027 prefix and standardised the subscriber numbers to seven digits, adding a 4 to the beginning of old six-digit numbers.
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-per-month text messaging package, Telecom were able 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.
In 2009 the mobile share was further decreased with newcomer 2degrees entering the market; both Vodafone and Telecom lost customers (25,000 and 19,000 respectively), some of which Telecom lost due to its unreliable image after its outages. In response to this, Telecom increased its marketing and improved its plan offerings.
The following shows customer numbers and market share information for Telecom Mobile, covering both the now-shut-down TDMA and CDMA networks and the current XT network.
|Quarter||No of customers||Market share %|
XT Network Outage
Telecom's new XT network faced two major, high profile outages in the consecutive months of December 2009 to February 2010. As a result of the loss of service Telecom offered a five million dollar compensation package for its customers.
When Telecom held a general monopoly in New Zealand telecommunications, it was criticised for using its incumbent status to charge high prices. Prices have subsequently dropped as competition in the market has increased.
Competitors alleged that Telecom engaged 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. Notably absent from the list of signatories were Telecom's ISP, Xtra, and several ISPs owned by its main competitor, TelstraClear. On 1 February 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". 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.
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.
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 experts and competitors disagreed — including the secretary of the OECD.
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. 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. 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.
From 2007, Yahoo! provided Telecom's email service, which came under heavy criticism in early 2013 following a spam and phishing attack described as the biggest to have ever hit the country. Telecom and Yahoo! automatically reset tens of thousands of users' passwords. In April, Telecom announced that despite the issue, it would keep Yahoo! on as an email provider. Problems with Telecom's YahooXtra email continued into December 2013 and further into 2014 with the latest problems reported on Jan 10
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- "Telecom sticks with Yahoo email". 3 News NZ. 5 April 2013.
- "Telecom probes fresh YahooXtra email virus". 10 January 2014.
- Telecom New Zealand Website
- Chorus Limited
- Yahoo! – Telecom Corporation of New Zealand Limited Company Profile
- Telecon – Telecom Parody