TelstraClear expected to appeal Commerce Commission pricing guidelines

By PETER GRIFFIN

Broking firm ABN Amro expects TelstraClear to appeal the Commerce Commission's pricing guidelines it has set in place for Telecom residential services TelstraClear is seeking to wholesale to its own customers.

While a draft decision from the Commission has granted TelstraClear a retail price minus two per cent discount for price-capped residential line access and local calling, ABN Amro said TelstraClear was likely to push hard for a discount level of between 18 and 25 per cent.

TelstraClear desperately wants to extract a decent wholesaling deal from Telecom so it can sell more telecoms and internet services to the residential market, where it has no direct access outside of Wellington, Christchurch and Kapiti.

"Not surprisingly, TelstraClear is unimpressed with the two per cent discount on basic access and is likely to appeal if unchanged for the final determination. TelstraClear will argue for a discount in the 18-25 per cent range," an ABN Amro analyst report read.

Ultimately however, ABN Amro expected only a small increase in the discount level once the final decision is released in June.

"We do not expect the discount to change that significantly, but would not be surprised if the final determination increases the discount slightly (possibly to around five per cent)."

TelstraClear can take advantage of a 16 per cent discount on "related and bundled services".

But Telecom is only required to deliver the services outside of metropolitan areas.

ABN Amro said Telecom's regulatory risk had "diminished" since the commission recommened a no-go on opening its network wide open to competitors.

"Although the [Communications minister Paul Swain] has yet to ratify this recommendation, we do not believe there will be significant changes," it said.