KEY POINTS:
Telecom announces its second quarter results today at a time when it is facing a number of serious questions about its performance from shareholders and customers alike. Both groups will naturally be interested to know more about its $400 million bid to acquire Australian network company Powertel.
Given that Australia has not been a happy hunting ground for Telecom - it has written down $2 billion on its ill-conceived 1999 takeover of AAPT - to many this latest venture will appear to be nothing more than a case of throwing good money after bad.
Of course, Telecom has its reasons, the main one being that PowerTel is necessary to revive the flagging fortunes of its AAPT subsidiary. The two companies would be a neat fit with AAPT handling the retail side and Powertel the broadband network, which is the second largest in Australia.
Indeed, according to one analyst, the bid is AAPT's best chance of survival because it must expand its infrastructure if it is to remain competitive. Telecom is confident of an improvement in returns within 18 months but in the light of AAPT's sorry history shareholders could be forgiven for treating this promise with a degree of scepticism.
Some are worried about a more immediate question: where is the money coming from? It has been suggested that rather than using the proceeds of the sale of the Yellow Pages to pay a special dividend, that money will go to finance the latest Australian venture. Telecom has refused to comment, saying only that details would be revealed at today's announcement.
Shareholders are not the only ones with a strong interest in those details. It will not escape the attention of consumers that while Telecom is aiming to spend hundreds of millions of dollars in Australia, its home network is demonstrably inadequate to the task.
It has been estimated that nearly half of Telecom's capital outlay for this financial year will be spent on super-fast connections to their Australian customers while New Zealanders receive an inferior service. The Telecommunications Users Association of New Zealand was at pains yesterday to remind the company of the "very substantial unsatisfied demand for broadband" on home ground.
If there was ever any doubt about the quality - or lack of it - that the company provides in this country it must surely have been dispelled since Jenny Gibbs of Paritai Drive appeared on the front page of the Herald paper and website last Thursday explaining how Telecom had failed to provide her with broadband. As a result of that story there has been an unflagging stream of letters to the site and paper from people who cannot get satisfactory service largely because the network is not up to it.
Ms Gibbs, for instance, was informed that all capacity at her Remuera exchange was used. Others have told of being kept waiting for periods of three to five years for broadband. Still others have been told that, despite broadband being faster than ever for most people, their connection speeds will have to slow down.
Underpinning these anecdotes is the stark fact that New Zealand is rated a lamentable 22nd out of 28 countries in the Organisation for Economic Co-operation and Development for the amount of money its companies spend on broadband infrastructure. Not surprisingly there is a good deal of anger and confusion among Telecom customers. Those who have been put in this position will be justified in questioning why the company is prepared to invest such large sums in Australian hardware when the network at home is clearly in need of an upgrade of its own.
