Telecom hopes for a break on regulation if it separates

Paul Reynolds says the Government could avoid massive waste if it partnered with Telecom. Photo / Dean Purcell

Telecom is trying to work out if the costs of separation can be offset by changes in regulation to benefit its shareholders, chief executive Paul Reynolds said at an investor day in Sydney.

He also said the company was open to partnerships once it got "the big picture right," and said it was not possible to put a cost on separation until it was worked out exactly what would be separated.

And he noted, in an answer to a question, that the Government would get more for its investment in ultra-fast broadband by partnering with Telecom because it already had 25,000km of fibre.

At yesterday's briefing Reynolds explained the background to the announcement last week that Telecom would consider a full separation of its business to be able to participate in the Government's ultra-fast broadband project. The company is already moving to an operational separation and has asked the Government to reconsider some of the undertakings given for that process.

Reynolds said once the Government established Crown Fibre Holdings "we had a bunch of commercial people with which we could discuss things".

The Government also offered in the last five to six months dialogue with potential bidders and policymakers on regulatory issues around ultra-fast broadband.

In the course of that discussion it became apparent that there was potential for change in regulation.

"There may be, if we get all the things lined up, an answer that may be in shareholders' interests," Reynolds said.

"These things might balance out potentially to something that may be positive. To find out if that balance can be positive to shareholders we have to open up."

The company had to decide if there was a quid pro quo on regulation that would make separation worthwhile.

He said nobody had ever separated a telecommunications company before, although a questioner pointed out that AT&T had been separated. He declined to estimate the cost of a full separation but said operational separation had built some key building blocks for it.

He said the company had to decide what products and service would be separated before if could say how much it would cost.

He said the Government could avoid massive waste if it partnered with Telecom compared to a completely new build of a network. "We have significant fibre investment that will provide a significant foundation," he said.

The company had said it was open to partnerships if they were commercially sensible but it was operating in an environment of immense complexity.

The company needed to get the big picture clear before refining it with partnerships.

Telecom shares closed up 1c at $1.91 yesterday.