Telecom risks fines over delay

By RICHARD BRADDELL

The Ministry for Economic Development is considering court action after Telecom failed to meet Saturday's deadline for producing separate accounts for its local network.

The manager of the ministry's telecommunications policy group, David King, said Telecom had informally notified the ministry 10 days ago that it would miss the deadline and had later confirmed it.

Telecom risks a fine of $200,000 plus $10,000 for each day it fails to comply.

However, a fine could not be imposed without a conviction and that could be secured only if Telecom did not have a reasonable excuse for its delay, Mr King said.

The ministry was in the process of appointing an independent adviser, probably from one of the big accounting firms, and a report from the adviser was likely to be received in about a month.

The requirement for separate local loop accounts is part of disclosures required by the previous Government with a first-time deadline of September 30.

Communications Minister Paul Swain said he was concerned about Telecom's failure and had asked officials to investigate.

The disclosures are intended to provide solid data on Telecom's costs, including those associated with the Kiwi share obligations, so that competitors negotiating interconnection and other matters with Telecom have an idea of what is reasonable.

But although Telecom said on Friday that it was losing $167 million from meeting its Kiwi share obligation for free local calling, it referred only obliquely to the fact it would miss the deadline for local network accounts.

It said it was "working towards more disclosures on the financial performance of its local network as a notional business entity separate from other operations of the company."

In its letter to the ministry, Telecom cited difficulties in capturing information and allocating costs shared between the local network and the rest of the business, a need to test the robustness of the accounting separation model, and calculation of transfer prices (the prices that one part of the business pays other parts) as reasons for the delay.

Telecom's Government and industry relations manager, Bruce Parkes, said that complying with the Kiwi share disclosure had been relatively straightforward because it only required examination of the costs directly attributable to each residential customer, offset by all the revenue, including long-distance and international calling.

But the complex process of allocating common costs was more difficult because revenues had to be divided up as well. It had to be decided what was attributable to the local loop or the national network.