Telecom New Zealand

From Wikipedia, the free encyclopedia

Telecom New Zealand

Type	Public
Founded	1987
Headquarters	Wellington, New Zealand
Key people	Theresa Gattung, CEO Roderick Deane, Chairman
Industry	Telecommunications
Products	Telecom
Revenue	NZ$5,605 million (2005)
Employees	6,500+ in New Zealand 2,000 in Australia
Slogan	Keep in touch
Website	telecom.co.nz

Telecom New Zealand NZX: TEL ASX: TEL NYSE: NZT 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.

[edit] History

[edit] 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.

[edit] 1990

Telecom is sold to two United States-based telecommunications companies, Bell Atlantic and Ameritech, for NZ$4.25 billion [1]. The two companies today still have part-ownership of the company ^{[citation needed]}.

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.

[edit] 1991

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

[edit] 1992

Telecom implements a NZ$200 million dollar fibre-optic cable connection between Australia and New Zealand.

[edit] 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.

[edit] 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

[edit] 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.

[edit] 1997

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

[edit] 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.

[edit] 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.

[edit] 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.

[edit] 2001

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

[edit] 2004

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

[edit] 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.

[edit] 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] 14MB Quicktime
June 27: Telecom announces it will voluntarily separate its business into two operating entities - Wholesale and Retail. [6]
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. ^[1]

[edit] Telecom Mobile

Telecom Mobile is New Zealand's second-largest mobile operator, with about 45% [7] 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 [8]. 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.

[edit] 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.

[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 and current local-loop 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 (for example, residential and business can now have an unlimited data plan for $44.40). 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 have alleged that Telecom engages in unfair practices to prevent them from gaining ground, for example by resellsing 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. [9] Notably absent from the list of signatories were Telecom’s ISP, Xtra, and several ISPs owned by its main competitor, TelstraClear.

[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] 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 ^[2]. 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 ^[3] ^[4]. 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. ^[5] ^[6]. 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 ^[7], the Green Party ^[8] and United Future ^[9] 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 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 competitiors, 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 ^[10]

The Government introduced the Telecommunications Amendment Bill in November 2006 to force Telecom to open its network to competitors. If passed, the bill will split Telecom into three business units, with network access separated from the wholesale and retail units. ^[1]

[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. Telecom now faces competition in all areas- cellular, internet, toll-calls and, subject to ongoing developments, in local calling.

[edit] References

Retrieved from "http://en.wikipedia.org../../../t/e/l/Telecom_New_Zealand_6f4e.html"