KEY POINTS:
The strong performance of British Telecom's share price over the past couple of years is the best indication of what Telecom shareholders can expect from operational separation, according to the incoming chief executive.
Paul Reynolds, who joined Telecom this week, has first-hand experience of operational separation as head of the wholesale division at British telecommunications giant BT.
BT has already undergone a process of operation separation which has seen it split into three units - BT Retail, BT Wholesale and Openreach, the access network organisation.
The New Zealand Government is proposing Telecom be split along similar lines.
Speaking at Telecom's annual meeting on Thursday, Reynolds said the key advantage of the split was it gave the management of each division the ability to focus on a distinct set of customers.
"What we found was the integrated organisation kind of got some of the issues a bit confused - too many trade-offs with operational separation's absolute focus on delivering what customers need," said Reynolds.
He said the changes enabled the retail business to be more innovative with new products and services without an over-dependence on the network unit; the wholesale unit was able to build trust with its customers and increasingly began to operate networks on behalf of those customers; and the access network operation has become the foundation for good customer service across the market by focusing on fast provisioning and repair.
"There's a lot of fears around the process ... but what we found was that all three parts of the business began to grow," Reynolds said.
Goldman Sachs JBWere analyst Tristan Joll said that despite fresh leadership Telecom faces an extremely challenging year ahead.
The Telecom share price has crept up over the past few weeks from a 2007 low of $4.02 on August 17 to close yesterday at $4.56 - 49c short of a high of $5.05 on January 29.
For example
* BT's share price has performed well since operational separation was implemented.
* The split into three units - retail, wholesale and Openreach, the access network organisation - has improved company performance.
* A similar split is planned for Telecom.
