Telecom split-off premature, says Vector

Simon Mackenzie. Photo / Brett Phibbs

The Government's plan for splitting up Telecom is unnecessary and premature, says a rival bidder for ultra-fast broadband contracts.

As part of its bid to build the Government's fibre internet network, Telecom has proposed to structurally separate from its network arm Chorus.

A supplementary order paper outlining the requirements of the split is before a select committee, alongside the Telecommunications (TSO, Broadband and Other Matters) Amendment Bill.

Under the law, if Telecom wins the broadband tender, Chorus would become a separate listed company to roll out fibre around New Zealand.

The split needs approval by Parliament because of the regulations currently controlling the way Telecom operates.

The company's shareholders would also need to approve the separation.

But Telecom's rival Vector said there is nothing legally requiring separation and said the supplementary order paper does not need to go before Parliament now.

Vector's chief executive Simon Mackenzie said Telecom would only need to split if it wants to govern the local fibre companies in charge of the fibre network.

Under the scheme, Telecom shareholders would be able to direct only after 2019.

In the first decade, control of the local fibre companies will be shared by the Crown and the winner of the scheme.

"[Taking a majority on a board] is a commercial decision Telecom can make, but that won't occur until 10 years down the path.

"That is why we are saying this doesn't need to be rushed through now," he said.

Mackenzie said separation should only go through Parliament if Telecom wins the contracts and once the industry has been properly consulted.

"Because of the competition issues that would arise, there should be an industry-transparent process that is run after the awarding [of contracts] that says how separation will occur, with everyone having fair input into how it will occur," he said.

Communications Minister Steven Joyce said the Government was simply working with the proposal Telecom put forward.

"There may have been more than one way for Telecom to participate in the UFB but their bid proposed structural separation."

"The timing of the supplementary order paper ensures the Government is clear about the regulatory environment proposed after any de-merger, so that Telecom shareholders could make an informed judgment on whether to de-merge or not should that proposal proceed."