Telecom vulnerable to watchdog's bite

Commerce Commission moves to investigate setting prices for rivals' access to Vodafone and Telecom's mobile networks will slow Telecom's growth over the next two years, say analysts.

The commission says it will look at fixing prices for competitors to use and put equipment in Vodafone and Telecom's cellphone towers.

Merrill Lynch analyst Patrick Russell said the mobile phone business had been a strong growth area for Telecom over the past three years.

Russell forecasted mobile growth would slow to 6.1 per cent in the next financial year and 3.2 per cent next year because the move increased the likelihood of disruption to the existing "cosy duopoly".

"We have seen some movement from potential competitors over the past few months which would appear to show that they will seriously consider network rollouts should the regulatory changes go their way."

Russell said TelstraClear had announced it would build a 3G mobile network in Tauranga and was probably waiting for the outcome of the regulation before announcing an extension of the network.

Econet Wireless could also be an aggressive competitor if it could find appropriate funding, he said.

Goldman Sachs JB Were analyst Andrew White said the move represented the strongest signal so far that the commission wanted to make it easier for new entrants in the sector.

Telecom spokesman John Goulter said the decision to look at the mobile phone market was not a surprise to the company or the market. "We look forward to playing our part in the review and giving our perspectives."

Vodafone regulatory manager Hayden Glass said the commission had not indicated major changes were needed. "Vodafone has standard terms and cost-based pricing, uses an industry-agreed process for co-location, has offered spectrum to a new entrant at a cost-based price, and its mobile termination rates are lower than those set by the UK regulator."