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Australian giant Telstra is threatening to dramatically scale back its investment in New Zealand if Government telecommunications reforms fail to deliver investment returns.
Telstra chief financial officer and TelstraClear director John Stanhope warned that New Zealand subsidiary TelstraClear could give up its ambitions to become a major player in telecommunications and instead concentrate on providing services for transtasman business customers.
Stanhope said that while the company had never seriously considered pulling out of New Zealand, further investment would hinge on the outcome of local loop unbundling - opening Telecom's network to competitors.
The Commerce Commission is setting the price Telecom can charge competitors to access its network and services as part of wider telecommunications sector reforms. The process for determining the terms and conditions for access is expected to be completed by the end of the year.
Stanhope said that if the "price wasn't right for investment" the company would look at refocusing the TelstraClear business.
"We'd really have to skinny it down. Maybe all we'd do is focus on the business segment, but we haven't contemplated those decisions yet."
Supporting business customers on both sides of the Tasman has been an important part of Telstra's business, but Stanhope said the question was how to grow the rest of the business.
He admitted that TelstraClear's growth in the New Zealand market had been slow up until now.
TelstraClear, which set up in New Zealand in 1996, has about 14 per cent of the market, compared with Telecom's 62 per cent, and Vodafone's 19 per cent overall share and 54 per cent mobile share.
It merged with Hutt Valley pay-TV provider Saturn Communications in 1999, and bought Clear Communications from British Telecom in 2001 to become TelstraClear.
In Wellington, Christchurch and Kapiti where it offers phone, internet and cable TV services to residential customers, it has 40 per cent of the market.
"That shows that if you can get to the customer, what TelstraClear actually delivers in terms of product range and the service it delivers, it competes very strongly."
Stanhope said that while there was agreement between politicians and industry on the importance of broadband for economic growth, Telstra needed to get a decent rate of return on any investment in broadband networks.
"We'll go to where customers want broadband at high speeds, but how much we have to pay for that last copper mile, which is the local loop, is important for us to know before we spend one dollar, because we need to know we can make a return on the investment."
Stanhope would not state how much Telstra was prepared to invest in New Zealand if the regulatory conditions were deemed favourable other than to say it was "considerable".
"The reality is that not one DSLAM [equipment that delivers high-speed internet services] has been put into a telephone exchange by us because we don't know the conditions, we don't know the rules. So we stand ready to make the investment and make it quickly when the right conditions are implemented.
"I'm deliberately using the word 'implemented' because there's a lot of talk and there is legislation that provides the way, but still we don't know the terms and conditions - how much we have to pay for that last copper mile - so until we know that I can't tell you how much we'll invest or when."
In Australia Telstra is committing $4 billion to build a fibre-to-the-node broadband network to reach four million metropolitan customers.
However, the company is at loggerheads with the Australian competition watchdog over regulatory and pricing issues.
