Law lets Govt buy share of Telecom

Communications Minister Steven Joyce. Photo / Getty Images

The Government could buy back parts of Telecom during the roll-out of the ultra-fast broadband network, if a law before Parliament is passed.

A paragraph in an add-on to the Telecommunications (TSO, Broadband, and Other Matters) Amendment Bill paves the way for the Government to invest directly in Telecom's network arm, Chorus, or to buy up its assets or shares.

The bill is being considered by the finance and expenditure select committee, with public submissions due by this Friday.

The supplementary order paper also sets out the legal process Telecom must go down if it wins broadband contracts and splits with Chorus.

The separation from Chorus was part of Telecom's broadband proposal and is hoped to prevent the company from dominating the market if it builds the fibre internet network.

Telecom has been privately owned since 1990 and the notion of the Crown investing in the company is not something the Government had previously tabled.

"[Under the law] the Government has got carte blanche to buy Telecom which is something they've never ever spoken about before in relation to the UFB [ultra-fast broadband] process or rural broadband initiative," said Telecommunications Users Association head Paul Brislen.

"It's a bit out of left-field, but I don't know what else you would use this [piece of law] for."

Communications Minister Steven Joyce said any interest the Government had in Chorus, was in fibre rather than the copper network.

"The definition of 'share' used in the SOP includes a range of forms of equity. So if the Crown were to invest in Chorus, it wouldn't necessarily be taking a direct shareholding.

"The equity stake could take another form that would not involve ownership of copper assets," Joyce said.

The relevant section of the supplementary order paper states that: "The Crown may provide UFB funding in these circumstances through investment in Chorus shares or assets.

"The section authorises any acquisitions by the Crown of Telecom's shares or assets pursuant to its selection as a partner."

The paragraph is buried near the back of the 77 page-long paper, which was tacked on to the bill last Wednesday.

However, if the Government was to buy into Chorus, Brislen believed it would be beneficial for the deployment of fibre in New Zealand.

"The single easiest thing for the network the country could do would be to buy back Telecom's network." Brislen pointed to Australia where the Government was forced to buy Telstra's network to stop the telco competing with its National Broadband Network.

The deployment of fibre would be "much cleaner" if the Government owned Chorus, Brislen said.

A Telecom spokesman said a buy-in was not definite and the law covers a range of scenarios.

"It effectively just keeps all options open rather than signalling any particular probable outcome," said corporate communications manager Ian Bonnar.

An industry analyst said the clause allowing the purchase sheds more light on Telecom's bid.

"Telecom must have proposed to the Government that it didn't want to create a separate company to be the local fibre company and instead use Chorus," he said.

If this is the case, it goes against the initial plan of the Ministry of Economic Development and Crown Fibre Holdings to have independent local fibre companies (LFCs) overlooking the network build.

These companies were to be a partnership between the Government and the private provider that wins broadband contracts.

THE CLAUSE

The Crown may provide UFB funding in these circumstances through investment in Chorus shares or assets. The section authorises any acquisitions by the Crown of Telecom's shares or assets pursuant to its selection as a partner.

Paragraph 8, pg 74 of the supplementary order paper to the Telecommunications (TSO, Broadband and Other Matters) Amendment Bill.