Fitch report on telcos details risks of regulatory regime

The government-prescribed break-up of telco incumbents in New Zealand and Australia has been a big driver of regulatory risk, says ratings agency Fitch.

Following a report on the Asia-Pacific region which ranked New Zealand and Australian telcos highly likely to undergo government regulation, the company has released a more detailed report on the local market.

The Fitch report said telcos in New Zealand and Australia were operating in an environment of unprecedented change, as either operational or structural separation and government-led fibre roll-outs significantly affected the competitive market structure. "Yet Fitch expects no significant negative pressure on financial indicators for at least two years," the report said.

Fitch noted both incumbent operators - Telecom in New Zealand and Telstra in Australia - had negotiated recent government fibre initiatives very differently. Telstra has indicated it would engage with the government-backed roll-out on the condition it got fair consideration for assets transferred into a national fibre network.

"Telecom New Zealand on the other hand, has publicly stated that it will not sell its fixed-line assets and will continue to work on its own national fibre network that will potentially compete with the Government's fibre network."

'There are three options for Telecom: to structurally separate, participate as a minority partner, or not to participate at all.

"Irrespective of the path, the evolving regulatory regime is likely to have a negative effect on Telecom's business and financial profile."