Spark New Zealand

Spark New Zealand Limited
Public
Traded as
Industry Telecommunications
Predecessor New Zealand Post Office
Founded 24 February 1987
Headquarters
Area served
 New Zealand, Australia
Key people
  • Mark Verbiest, Chairman[2]
  • Simon Moutter, CEO
  • Jolie Hodson, CFO
Products
  • Landline services
  • Ultra Mobile
  • Broadband services
Services
Revenue Decrease NZ$5,112,000,000 (2011)[3]
Decrease NZ$277,000,000 (2011)[3]
Profit Decrease NZ$166,000,000 (2011)[3]
Total assets NZ$6,392,000,000 (2011)[3]
Total equity NZ$2,311,000,000 (2011)[3]
Number of employees
 5,565[4]
Divisions
  • Spark Retail
  • Spark Wholesale
  • Spark Digital
Website spark.co.nz

Spark New Zealand (formerly 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 Spark Digital division). It has operated as a publicly traded company since 1990.

Spark is one of the largest companies by value on the New Zealand Exchange (NZX). Further, it is the 39th largest telecommunications company in the OECD.[5]

Telecom New Zealand was formed in 1987 from a division of the New Zealand Post Office and privatised in 1990. In 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. In 2011 the demerger process was complete, with Telecom and Chorus becoming separate listed companies.[6] On 8 August 2014, the company changed its name to Spark New Zealand.[7]

History

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. The selling price of Telecom was considered by some to be extremely low, given that Telecom had a monopoly of all phone lines in New Zealand at the time.[8] 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.

1990s

In 1990, Telecom was sold to two United States-based telecommunications companies, Bell Atlantic and Ameritech, for NZ$4.25 billion.[9] Around the same time, the Kiwi Share[10] 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, 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.

2000s

The original Telecom logo
2000
2003
2004
2005
2006
2007
2008
A van with the Chorus livery.
2009
Left: Telecom New Zealand logo from 2003-2009. Right: Telecom New Zealand logo from 2009-2014.

2010s

2010
2011
2013
2014
A re-branded phone booth in downtown Wellington

Mobile network

Telecom Mobile, the mobile division of Telecom, celebrated 500,000 mobile customers connected to its network in 1998, which doubled to one million customers by 2000. In 2005, a phreaker named ^god exposed a vulnerability with the mobile network, allowing public access to almost anyone's voicemail; in response to concerns over privacy and security, this network issue was resolved.

On 31 March 2007, the 025 D-AMPS ("TDMA") cellular network was closed down.[31] Then on 8 June of that year, Telecom Mobile announced plans to build a hybrid W-CDMA/UMTS-CDMA 850 MHz network,[32] based on the WCDMA HSPA technology, to eventually replace its current CDMA EV-DO network. On 29 May 2009, Telecom launched its new network, branded as XT, to the public.[33]

In December 2009[34] and February 2010,[35][36] Telecom's new XT Mobile Network experienced high-profile failures for many customers in locations from Taupo south, due to a Radio Network Controller failure in Christchurch. As a result of the loss of service Telecom offered a five million dollar compensation package for its customers.[37]

In April 2010, Telecom released its first Android (operating system) handset on the XT Mobile Network, the LG GW620.

On 31 July 2012, the Telecom CDMA mobile network is closed down.[38]

In September 2013, Telecom officially launched 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.[39] In October 2013, Telecom sought 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.[40]

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".[41] The decision significantly affected the company's market share,[42] 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.[43][44] 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,[45] the Green Party[46] and United Future[47]) 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.[48] 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.[49]

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.[50]

Spark Broadband

Spark 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.[51]

Spark offers asymmetric digital subscriber line (ADSL), very-high-bit-rate digital subscriber line (VDSL) and fibre to the premises (FTTP) fixed-line broadband. FTTP customers may choose either 30/10 Mbit/s or 100/50 Mbit/s maximum speed (down/up); ADSL and VDSL customers' download speeds are only limited to what their line and equipment can handle, while upload speeds are limited to 1 Mbit/s and 10 Mbit/s respectively. All three offer both data-capped and unlimited plans. Data-capped customers may choose either to pay extra per GB (or part thereof) over their data cap, or have their speed throttled back to 128 kbit/s at no charge once they exceed the cap. Unlimited plans have no data caps, but a customer's download and upload speeds may be throttled during times of network congestion.

Spark Ultra Mobile

Spark Ultra Mobile is New Zealand's second-largest mobile operator by market-share, behind Vodafone.[52] 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,[32] 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.

Customer numbers and market share

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 %
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%
November 2005 1,600,000 46%
March 2007 1,900,000 49%
February 2010 2,152,000 44.4%
August 2012 1,600,000 32.2%

Criticism

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.[53] 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".[54] 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.[55]

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[56] 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.[57]

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.[58] 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.[59][60] 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.[61] Telecom and Yahoo! automatically reset tens of thousands of users' passwords.[62] In April, Telecom announced that despite the issue, it would keep Yahoo! on as an email provider.[63] Problems with Telecom's YahooXtra email continued into December 2013 and further into 2014 with the latest problems reported on 10 January.[64]

References

  1. ↑ Twose, Helen (30 June 2007). "Telecom opts for tale of two cities". NZ Herald.
  2. ↑ "Telecom Board of Directors". Telecom.
  3. ↑ 3.0 3.1 3.2 3.3 3.4 "Telecom Corporation of New Zealand Annual Report (For the year ended 30 June 2011)" (PDF).
  4. ↑ "Spark New Zealand FY14 Results (For full year ending 30 June 2014)" (PDF).
  5. ↑ Griffin, Peter; Twose, Helen (19 July 2007). "NZ's wealthy telcos stingy on investment". NZ Herald.
  6. ↑ Fletcher, Hamish (1 December 2011). "Plenty of pomp as Chorus and Telecom part". The New Zealand Herald. Retrieved 25 January 2012.
  7. ↑ 7.0 7.1 Edward, Swift (21 February 2014). "Telecom rebranding to become Spark". Newstalk ZB. Retrieved 21 February 2014.
  8. ↑ "Telecommunications reform in NZ" (PDF).
  9. ↑ "History and quick facts". Telecom NZ.
  10. ↑ "Kiwi Share". MED.
  11. ↑ "Spark Facebook page - A refreshing change". January 2003. Retrieved 1 January 2015.
  12. ↑ 12.0 12.1 McDonald, Sarah (12 January 2009). "Telecom gives Ferrit the chop". National Business Review. Retrieved 12 January 2009.
  13. ↑ Nowak, Peter (9 May 2006). "Gattung admits Telcos not being straight". The New Zealand Herald.
  14. ↑ Keown, Jenny (1 July 2006). "Telecom names head for new wholesale division". NZ Herald.
  15. ↑ Trevett, Claire; Keown, Jenny (26 January 2007). "Telecom finally organises broadband for multimillionaire". NZ Herald.
  16. ↑ Keown, Jenny (25 January 2007). "Rivals move after millionaire can't get Telecom broadband". NZ Herald.
  17. ↑ "Telecom New Zealand Appoints Paul Reynolds as Chief Executive Office". Telecom NZ. 28 June 2007.
  18. ↑ "Telecom names new boss". NZ Herald. 28 June 2007.
  19. ↑ "Theresa Gattung to Conclude Role as Telecom CEO". Telecom NZ. 2 February 2007.
  20. ↑ Twose, Helen (6 September 2007). "Gattung's $5m golden goodbye". NZ Herald.
  21. ↑ Twose, Helen (17 January 2008). "Telecom's Chorus takes centre stage". NZ Herald.
  22. ↑ Twose, Helen (16 January 2008). "Telecom's new network unit named Chorus". NZ Herald.
  23. ↑ "EPMU prepares Visionstream campaign". Stuff.co.nz. 8 July 2009.
  24. ↑ "CTU urges Govt to stop broadband talks". NZ Herald. 25 August 2009.
  25. ↑ "Telecom may have breached spam laws". Stuff.co.nz. 14 February 2011.
  26. ↑ "Back Benches Ep. 3 2011". TVNZ. 9 March 2011.
  27. ↑ "Telecom broke anti-spam law". National Business Review. 9 June 2011.
  28. ↑ "Telecom announces sale of AAPT for A$450 million". New Zealand Exchange. 9 December 2013.
  29. ↑ "Bright Spark - Telecom changes name". NZ Herald. 8 August 2014. Retrieved 8 August 2014.
  30. ↑ "Spark broadband out nationwide". The Dominion Post. 6 September 2014. Retrieved 7 September 2014.
  31. ↑ "Goodbye to 025 network". NZ Herald. 31 March 2007. Retrieved 31 March 2007.
  32. ↑ 32.0 32.1 "Telecom Future-Proofs Mobile Services With New Network Investment". Telecom NZ. 8 June 2007.
  33. ↑ Chang, Adrian; Vaughan, Gareth (7 May 2009). "Vodafone, Telecom reach deal". Business Day (Fairfax New Zealand). Archived from the original on 8 May 2009.
  34. ↑ Nash, Kieran (14 December 2009). "Telecom's XT network still down south of Taupo". The New Zealand Herald. Retrieved 18 February 2010.
  35. ↑ "Telecom XT outages unacceptable — association". NZ Herald. 27 January 2010. Retrieved 18 February 2010.
  36. ↑ "XT outage blamed on 'unusual problems'". NZ Herald. 16 February 2010. Retrieved 18 February 2010.
  37. ↑ Vass, Beck (3 February 2010). "XT users share $5m compo package". NZ Herald. Retrieved 18 February 2010.
  38. ↑ "Telecom names CDMA shut-down date". Netguide. 1 July 2011.
  39. ↑ "Telecom launches vibrant Ultra mobile branding".
  40. ↑ "Telecom seeks clearance to acquire radio spectrum". Scoop Media. 4 October. Check date values in: |date= (help)
  41. ↑ "Govt announces broadband changes". TVNZ. 3 May 2006.
  42. ↑ Pannett, Rachel; Louisson, Simon (4 May 2006). "$1.1 billion wiped off Telecom's value as shares plunge". NZ Herald.
  43. ↑ "Govt to open up Telecom network for faster broadband". NZ Herald. 3 May 2006.
  44. ↑ Withers, Tracy (3 May 2006). "NZ Says Telecom Must Give Rivals Greater Access to Network". Bloomberg.
  45. ↑ NZ First (4 May 2006). "NZ First Welcomes Telecom Competition".
  46. ↑ NZ Greens. "Government moves on Telecom welcomed".
  47. ↑ United Future NZ. "Copeland: Local loop unbundling decision a win for all New Zealanders".
  48. ↑ "Telecom to separate wholesale and retail operations". Telecom NZ. 27 June 2006.
  49. ↑ Keown, Jenny (28 November 2008). "Telecom's tough year continues — it's split into three". NZ Herald.
  50. ↑ "More job cuts possible at Telecom". TVNZ. 28 Mar 2013.
  51. ↑ "Vodafone acquires TelstraClear". Vodafone.
  52. ↑ "Vodafone — company facts & figures". Vodafone.
  53. ↑ Saarinen, Juha (18 July 2005). "ISPs formally complain to Commerce Commission".
  54. ↑ "The Consumer Complete Ass Awards 2006", 31 January 2007, Press Release: Consumer's Institute
  55. ↑ "The Roger Award".
  56. ↑ Nowak, Peter (25 October 2005). "Free calls mean less broadband — Telecom". NZ Herald.
  57. ↑ Nowak, Peter (31 October 2005). "OECD takes shot at Telecom". NZ Herald.
  58. ↑ Nowak, Peter (8 February 2006). "PM joins critics of internet monopoly". NZ Herald.
  59. ↑ Nowak, Peter (24 March 2006). "Open up access, says 'internet evangelist'". The New Zealand Herald.
  60. ↑ Bell, Stephen (28 March 2006). "Cerf wary of biased broadband business models". Computerworld.
  61. ↑ "Telecom rush to fix hack". 3 News NZ. 11 February 2013.
  62. ↑ "Telecom defends email reset operation". 3 News NZ. 18 February 2013.
  63. ↑ "Telecom sticks with Yahoo email". 3 News NZ. 5 April 2013.
  64. ↑ "Telecom probes fresh YahooXtra email virus". 10 January 2014.

External links