Liam Dann: As usual, it is the investors who lose out

Telecom shares were already so low that they didn't have far to fall in the wake of the XT disaster. But events of the past month are still devastating for long-term - long-suffering - shareholders.

Telecom, despite regulation, has a steady revenue stream in the shape of its fixed-line business so it can keep paying healthy dividends as long as it manages costs.

That gives the share price a natural floor. Even at the height of the global market meltdown it didn't fall below $2.20. When it dropped below $2.30 this week there were plenty of new investors ready to jump in and the shares bounced back. It is easy to see the upside when you are buying at rock bottom.

But for the thousands of Mum and Dad investors who bought in at $3, $5 or even $7 over the past 10 years the damage to Telecom's future growth prospects is almost too painful to contemplate.

For the past year the share price had been clawing its way back, buoyed by the success of the XT launch and new chief executive Paul Reynolds' no-nonsense three-year strategic plan to turn the company around.

The positivity had worked its way through the staff and there was a sense that, while there was still work to be done, things were finally on the up.

Much of that hope has been dashed in the past month. The bad old Telecom everyone once loved to hate is back.

The extent to which Reynolds and Telecom management are directly responsible for their own misfortune is still unclear.

They've pushed the blame towards XT builder Alcatel Lucent. But there are still unanswered questions about the cost parameters Alcatel was given to work with and the timing of the launch.

If you believed every word of the well-managed Telecom spin this week you could be forgiven for thinking Telecom management would not have done anything different if they could go back in time.

Alcatel, for commercial reasons, will not be telling their side of the story.

Like the extent to which Telecom brought harsh government regulation down on itself under Theresa Gattung, the issue of blame may never be resolved. Certainly, like that regulatory debate, there are two stories being told.

The Telecom version and the version of the hundreds of analysts, commentators and technology bloggers and tweeters who follow the sector with obsessive enthusiasm. But whatever the extent of their poor decisions behind XT the road looks rough for the foreseeable future.

The highest paid man in the country is no longer spending his time looking at growth strategies and restructuring plans to reduce costs. Instead he is up at all hours dealing with outages. He is planning reviews and damage control, trying to get a fix on what is going wrong and how he might fix it.

His focus is diverted from where shareholders want it to be - growing the company and creating wealth. As much as the loss of earnings and brand damage, this too is a serious setback for the company.

It is going to take longer than hoped for Reynolds to execute his turnaround strategy. He is unlikely to being going anywhere in a hurry.

For the sake of his own career he needs to see Telecom through this disaster before he heads to new pastures. But whether he still has the appetite to lead the company through to its long-term goals is now less certain.

When the share price will rise again is the great unknown.

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