Labour threat to Telecom fails to rock sharemarket

Photo / Thinkstock

The market has shrugged off Labour's threats to review Telecom's ultra-fast broadband contracts if elected this November.

Labour communications spokeswoman Clare Curran told the Herald yesterday she was unhappy with both the broadband legislation before Parliament and Government contracts with Telecom.

The party "reserved the right" to overhaul both if it gets into power, she said.

But if Labour's position on the broadband contracts posed any threat to Telecom, the market did not show it and the company's shares closed at $2.41, up 1c.

The contracts pave the way for the ultra-fast broadband scheme, which aims to provide internet speeds of 100 megabits per second to 75 per cent of New Zealand by the end of 2019.

Telecom now plans to split from its network-arm Chorus, which will become a separate public company and roll out the bulk of the fibre network.

Craigs Investment Partners' Geoff Zame said contract reform was not an issue now and would only become one if Labour won in November.

Communications Minister Steven Joyce shrugged off Labour's claims and said there was little risk of the contracts being changed.

"The reality is that it is highly unlikely to happen because governments don't do that, they respect contracts because if they don't then no one would want to do business with them," Joyce said.

Act Party leader Don Brash said on Monday that Labour's stance amounted to "wanton economic thuggery".

Chorus will put in an estimated $500 million for the broadband build to complement the $929 million of taxpayer funding, which the company will be required to pay back to the Crown over the next 15 to 25 years.

The prices consumers will pay for fibre internet have been fixed in Government contracts until 2020 and after a tide of industry lobbying and political opposition, the Commerce Commission is now able to regulate prices if it deems them uncompetitive.

If the commission regulates and lowers prices, the period which Chorus has to pay back taxpayer funds will be extended to make up for any lost revenue.

But while Labour and lobby groups were united in their fight to give the commission the powers to regulate UFB, there is by no means a consensus on contractual review.

Consumer New Zealand believed the contracts should be left alone, and internetNZ, which had been a sharp critic of the broadband law before the commission was included, said any tinkering with contracts could stall the rollout of the fibre network.