Telecom gains rival for ultra-fast contract

A group of North Island lines companies has closed the gap with Telecom in the fight to build a chunk of the Government's ultra-fast broadband network.

Crown Fibre Holdings, the entity overseeing the billion-dollar broadband scheme, said yesterday that it would enter into priority negotiations with the Central Fibre Consortium to construct the network in 10 North Island towns. The Central Fibre Consortium is made up of Counties Power, Horizon Energy Distribution, Unison Networks, Central Lines and the Eastland Group.

Telecom had been in exclusive negotiations with the Crown to deploy a fibre network in the region but now will face competition in Napier-Hastings, Palmerston North, Rotorua, Taupo, Pukekohe, Waiuku, Whakatane, Gisborne, Feilding and Masterton.

The winning bidder will partner with the Crown to bring internet speeds of at least 100 megabits per second to the towns' homes, businesses and schools.

The announcement adds another rival Telecom must contend with across the 25 areas where it hopes to build the network.

In a similar move last month, Crown Fibre said it would enter into priority negotiations with Vector for the Auckland leg of the scheme, leaving Wellington as the only major centre where Telecom's bid is going uncontested.

Goldman Sachs' Tristan Joll said the growing number of rival bids put pressure on Telecom's negotiations.

"It adds tension to the process if you're thinking about it from Telecom's point of view," Joll said.

"[Yesterday's announcement covers] 11 per cent, by population, of the UFB footprint, so it's a decent chunk."

Forsyth Barr's Guy Hallwright said Crown Fibre Holdings might want rival bidders in every region Telecom was vying for. "It's starting to look like they want priority bidders as well as Telecom in all the areas," he said.

But with a new party at the negotiating table, Joll said a final agreement could be further away than the Crown initially forecast.

"It looks like [the Government has] to do a lot of work in a short time," he said.

Joll did not believe the consortium was "window-dressing" and only taken on by the Crown to create the appearance that the bidding process was competitive.

The national representative of the scheme's non-Telecom bidders, the New Zealand Regional Fibre Group, said the shortlisting of more of its members shows the Government has confidence in what they can offer.

"I think what we are seeing is recognition from the Crown that many of our members are specialist fibre companies who have proven their expertise time and time again," said NZRFG chief executive Vaughan Baker.

Communications Minister Steven Joyce also welcomed the move and said competition would deliver the best result for taxpayers and consumers.

However, First NZ Capital's Greg Main said the new negotiations created more uncertainty for Telecom investors.

"It highlights investment risk and uncertainty. It doesn't give investors much confidence that [Crown Fibre Holdings] won't keep changing the rules either, even if [Telecom] gets an agreement," Main said.

Telecom's share price closed down 5c yesterday at $2.10.

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* There are 33 areas in the UFB scheme.
* Contracts have already been awarded for 7 areas (Hamilton, Tauranga, Tokoroa, New Plymouth, Hawera, Wanganui and Whangarei).
* Telecom is negotiating to build the scheme in 25 of the remaining 26 areas.
* Yesterday, the Crown announced it would would negotiate with regional lines companies for 10 North Island areas.