Cunliffe ducks resignation calls over Telecom comments

Communications Minister David Cunliffe has been forced to deflect calls for his resignation as the sharemarket watchdog looks into comments he made about Telecom.

Mr Cunliffe told Bloomberg news agency earlier this week that Telecom may have to cut its dividend payout to fund increased investment.

The statement apparently was instrumental in $157 million being wiped off Telecom's market capitalisation during trading on Tuesday.

The New Zealand Exchange said yesterday it had forwarded the matter to market watchdog the Securities Commission for investigation after complaints from market participants.

The exchange is concerned Mr Cunliffe's statements were price sensitive but not released to the whole market.

"They were carried by a wire service which serves a section of the market, but to which the average retail investor does not have access," the exchange said.

Mr Cunliffe, a rising star for Labour, tried to distance himself from the comments early yesterday by releasing a statement saying he was partly "taken out of context".

"I was asked a wide range of questions on public and industry reaction to the recent broadband policy announcements," the statement said.

"The subject matter was not new but previously released in the telecommunications stocktake Cabinet paper." Mr Cunliffe said he had no information about Telecom's future dividend policy when he gave the interview.

But by yesterday afternoon, after learning that his comments had been referred to the Securities Commission, Mr Cunliffe was silent.

He faced a barrage of criticism and calls for his resignation in Parliament from the National Party, but would say only that it was inappropriate to comment given the watchdog's involvement.

Mr Cunliffe's gaffe has come at a bad time for the Government.

The Government would undoubtedly rather be trumpeting its regulatory moves against Telecom as a positive for consumers than defending itself over another watchdog investigation.

The situation has echoes of Prime Minister Helen Clark's blunder in 2001 when she suggested Air New Zealand shareholders hang on to their shares.

Her comments came at a time when speculation was rife that the Government may be about to unveil a rescue plan for the then ailing airline.

National Party finance spokesman John Key said yesterday that Mr Cunliffe's comments were irresponsible given his role, which effectively made him a Telecom insider.

"The Government has made it clear that [Telecom] will be under the supervision of the Government for the next 18 months before they determine whether the company will be broken up or not," Mr Key said.

"So when [Mr Cunliffe] makes a statement, there is an implication that there is sentiment that sits behind that - that he is potentially sending a message."

Mr Key said that trading in Telecom shares after Mr Cunliffe's comments was much heavier than normal, and small investors were the ones most likely hurt.