Legal delay ends Vodafone challenge over Kiwi Share

By PETER GRIFFIN, IT editor

Vodafone's attempt to challenge the size of its Kiwi Share contribution in the Court of Appeal has been thrown out after an embarrassing mix up over legal advice invalidated the appeal.

Fuming at a Commerce Commission ruling released in December that required it to stump up nearly $7 million to help cover the losses shouldered by Telecom in delivering basic phone services nationwide, Vodafone decided to go to court.

It launched its appeal bid in late February, outside the 20 working day appeal window.

Vodafone put the delay down to its external lawyers, Bell Gully, withdrawing as advisers citing a conflict of interest.

Bell Gully also represented TelstraClear, another Kiwi Share contributor which would have potentially seen its own contribution increase in any recalculation.

The Belly Gully lawyer working for Vodafone at the time, Malcolm Webb, is the brother of telecommunications commissioner Douglas Webb, however that is understood not to have contributed to the conflict of interest. Malcolm Webb has since left Bell Gully.

Bell Gully appears to have delayed telling Vodafone it intended to step down.

Vodafone said the late appeal would not prejudice other interested parties such as Telecom and TelstraClear.

But that argument did not sway High Court Judge J. Williams. He said it was not appropriate to grant Vodafone special leave to appeal.

"Although the necessity for Vodafone to change solicitors in late January is unfortunate, it is unclear why it took two weeks for Bell Gully to decide it was unable to continue to advise Vodafone ... "

Judge Williams added that " ... all three of the major participants in this matter are all well capable of sustaining the financial impact of the ... determination and any changes."

Vodafone could revisit the Kiwi Share issue in future because the amount is recalculated each year, he added.

The mobile operator took issue with the Commerce Commission's revenue calculations in setting the size of the Kiwi Share - $65.7 million on an annualised basis. On an annualised basis Vodafone wears a cost of around $13 million.

Judge Williams said the Commerce Commission, Telecom and TelstraClear were entitled to claim legal costs against Vodafone.

EXPENSIVE OBLIGATION - TSO - TELECOMMUNICATIONS SERVICE OBLIGATION.

* The TSO was created by the Telecommunications Act of 2001, updating the old Kiwi Share Obligation.

* It is a contract between the Crown and Telecom, created when Telecom was privatised in 1990.

* Under the contract, Telecom must provide telephone services, free local calling and low speed internet access throughout New Zealand.

* The 2001 act compensates Telecom for the cost of its duty to service unprofitable customers by levying other telcos.

* The cost is split among the other telcos through a formula relating to their revenue