KEY POINTS:
The market is underestimating the cost and complexity of regulatory changes being forced on Telecom, group chief financial officer Marko Bogoievski says.
The Government passed a law in December forcing Telecom to split into three operational units -- wholesale, retail and network.
It has also forced Telecom to open up its local residential networks to competitors -- known as local loop unbundling.
In a presentation to analysts in Sydney today, Mr Bogoievski said the new regulatory environment restricted the ability of Telecom's retail businesses to compete.
But, at the same time, the new structure did not create instantly capable and focused competitors.
Assumptions being made about retail market share loss implied significantly improved capability and execution from Telecom's competitors, Mr Bogoievski said.
Fortunately, a significant amount of value still depended on Telecom's own ability to execute its plans.
The upside was significant if Telecom could carry out its planned service enhancements while being disciplined about future capital spending, he said.
The company had a solid understanding of its key value drivers, and had the assets and capability to compete in the new environment.
Mr Bogoievski also noted that to achieve the Government's digital strategy objectives, significant industry investment in broadband would be needed, but Telecom could only invest where it saw returns.
Important discussions were needed with officials and politicians about this country's long term investment needs, he said.
"Future investment in NZ broadband is highly dependent on pricing signals, access to content, success of Telecom retail, and the physical demands of operational separation."
Telecom's Consumer NZ chief operating officer Kevin Kendrick told the briefing a key consumer retail challenge for the company was balancing broadband demand with supply.
He provided a graph showing retail demand for broadband data was outpacing demand growth for connections.
In particular, average usage increased when Telecom launched its Go Large broadband package towards the end of last year.
Last month Telecom admitted it made an error with the Go Large plan and said it would credit customers of the service.
An internal technical review identified an issue with the way internet traffic was being managed on the plan.
Telecom's share price was down 15c, or 3.1 per cent, to $4.68 in the middle of the afternoon today, with the NZSX-50 index down 1.3 per cent overall.
In May, after the Government first announced its proposals for regulatory change, Telecom's share price shed about 20 per cent to fall to $4.55. It hit a 13-year low of $3.93 in August, but has recovered to trade between NZ$4.66 and NZ$5.15 over the past three months.
- NZPA
