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Telecom New Zealand
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Telecom New Zealand is a
Wellington-based telephone company 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.
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. Others
consider that the capital requirements to modernise the network
were better provided by private enterprise than the government. |
History
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.
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 CDPD
mobile data network. The New Zealand
telecommunications market is progressively
deregulated.
1990
Telecom is sold to two United States-based
telecommunications companies, Bell Atlantic and
Ameritech, for NZ$4.25 billion. The two companies
today still have part-ownership of the company.
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
Telecom implements a NZ$200 million dollar fibre-optic
cable connection between Australia and New Zealand.
1993
Ameritech and Bell Atlantic reduce their shares 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 an Internet Service Provider, 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 fast 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 087 dial up
number. Many consumers complain that this is in
breach of Telecom's Kiwishare Agreement where
residential customers are allowed free local
calling.
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 ISP's.
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 $NZ 916 million.
2006
May 3: The New Zealand Government announces that it
will require Telecom to unbundle the local loop to
provide "access to fast, competitively priced
broadband internet".
May 4: NZ$ 1.1 billion of its market capitalisation
was wiped off following the announcement.
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.
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. 14MB
Quicktime
June 27: Telecom announces it will voluntarily
separate its business into two operating entities -
Wholesale and Retail.
Telecom Mobile
Telecom Mobile is New Zealand's second-largest
mobile operator, with about 45% market-share, behind
Vodafone. Telecom operates AMPS, Digital D-AMPS/TDMA
and CDMA, including EV-DO mobile phone systems in
New Zealand. AMPS and D-AMPS service is sold under
the 025 brand and CDMA services are sold under the
027 brand. Telecom is set to turn off the 025
network on 31 March 2007. Most of its customers have
migrated to the 027 network. The 027 CDMA EV-DO
network is marketed as T3G, a 2 MB third-generation
mobile system.
Customer numbers and market share
The following shows customer numbers and market
share information for Telecom Mobile, including both
025 and 027 customers. 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%
Recent information shows Telecom to have 1.9 million
customers, against Vodafone's over 2 million.
Criticism
Telecom has been criticised for using its status as
a private monopoly to charge high prices whilst
providing poor service, as an example; on XTRA
Jetstream it can cost over $1200 to download 100GB
of data in a month, plus monthly access fees (at
residential rates, business is more expensive).
While there are competitors in the cellular and
toll-call markets, it has proved difficult for other
companies to establish residential services due to
Telecom’s control of local loop services. Telecom
has also leveraged its control of residential
services to establish the country’s largest ISP,
Xtra.
Competitors allege that Telecom engages in unfair
practices to prevent competition from arising, and
resells 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 TelstraClear.
Telecom’s response
In an article published on 25 October 2005, Telecom
claimed that the reason for poor broadband uptake in
New Zealand was because of 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.” However, internet
experts disagreed and even the secretary of the OECD
took a shot at Telecom.
Late 2005, early 2006
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, during which Theresa
Gattung was grilled by the show’s host, and an
episode of the New Zealand edition of Sunday.
Critical articles have 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.
In a decision by the New Zealand Government on May
3, 2006 - Telecom has been forced to unbundle the
local loop. This will allow competitors (such as
TelstraClear and Ihug) to offer broadband and other
communications services throughout New Zealand by
installing their own equipment in the exchanges. The
announcement of this decision was rushed 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 budget 2006. Most of Telecom's
competitors and many independent commentators such
as InternetNZ and Paul Budde have applauded the
decision. Legislation will have to be introduced to
enable the regulatory changes. Three other political
parties, New Zealand First , the Green Party
and United Future all appear to support the decision
which would give the government at least 66 votes if
there are no votes against the party line.
Following the events of May 2006 the company was hit
by a series of other negative news. 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. Then, the
Commerce Commission granted two of Telecom's
competitiors, CallPlus and iHug, access to an
unrestricted, Unbudled 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
Effects of monopoly
The New Zealand Treasury has estimated the economic
loss from Telecom's monopoly to be in the region of
$50–$250 million a year. Another study commissioned
in 1998 by rival company Clear (now TelstraClear)
estimated that the loss was $400 million a year. |
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