Rattled Govt reassures telcos investors

By RICHARD BRADDELL

The Government has again come across as rattled by business confidence, yesterday seeking to assure investors there would be no heavy-handed intervention in the telecommunications sector.

Referring to the sharp drop in Telecom's share price, Finance Minister Michael Cullen said that the sharemarket seemed to have over-reacted to possible regulatory changes.

Dr Cullen said the markets should draw their conclusions on likely regulation from this week's electricity reforms, which had not resulted in unnecessarily heavy regulatory processes.

Breaking Communications Minister Paul Swain's silence on the inquiry's report, Dr Cullen said:

"Mr Swain has always been sceptical about the value of industry specific regulation, rather preferring to look at using the Commerce Commission as a vehicle for regulatory changes which may be approved."

While it can be taken that the Labour Party is leaning towards using the Commerce Commission for telecommunications oversight, the issue may still come under debate with Labour's Coalition partners.

The Hugh Fletcher-led inquiry team said its proposed electronic communications commissioner should operate separately from an enforcement body such as the Commerce Commission because its role was to facilitate industry solutions.

Inquiry panel member Cathie Harrison said she accepted that the electricity market would be regulated from the Commerce Commission, but it was more static in terms of technology and demanded less speedy solutions than the commission's part-time members could bring to telecommunications.

The commission has often been regarded as a soft touch for Telecom, but British Telecom's alliance director at Clear Communications, Rhoda Holmes, said a regulator within the commission could do the job.

"Whether that regulator is based within or without the Commerce Commission has much less importance than properly defining the role, which we think the inquiry report has done in a very pragmatic and balanced way," she said.

Telecom chief executive Theresa Gattung was pleased the Government had provided clarification.

"Finance Minister Michael Cullen's statement demonstrates an understanding of the dynamics of financial markets and their particular need for clarity on government thinking at certain times," she said.

Telecom's recent poor performance has been attributed among other things to the global malaise in telco stocks and more recently to general market nervousness prompted in part by Reserve Bank Governor Don Brash's stagflation comments.

Telecom this week lost 32c. Yesterday, it closed up 8c at 548c, having surrendered modest early gains after Dr Cullen's remarks.