By Rod Oram
Between the lines
Wrestling with the internet's impact on New Zealand business? Consider the relevance of these three news items from Britain.
First, Chancellor Gordon Brown will today deliver another attack on British Telecom's restrictive internet access policies. Significantly, he has chosen to let rip from a New York platform. "Those who represent the opening of competition as Government interference are missing the point that in the global economy, competition at home is the key to competitiveness," he plans to say.
Under duress from the Government, BT will open its local phone network to rivals in July 2001. Oftel, the telecoms regulator, believes BT could open up earlier but is stalling to protect its dominant position.
The Government here is planning to review telecoms regulation. The Ministry of Commerce concedes that the present light-handed approach has failed to deliver sufficient competition or low enough prices.
Yet for a telecoms breakthrough which will help make New Zealanders globally competitive, the review will have to dismantle the last bastions of Telecom's dominance. Will the Government have the courage? Much is at stake.
Consider the second item. Freeserve plans to buy other internet companies, paying with its soaring shares. Started as a virtually free internet service provider by Dixons, the electrical goods retailer, Freeserve was worth sterling 1.5 billion ($4.7 billion) when it was floated last July. Today, it is worth sterling 7.7 billion.
Freeserve shows how to parlay internet success into a powerful new force in business. By comparison, British Telecom has done well for a traditional telco building its internet business, but it is lagging behind true e-players such as Freeserve.
At home, Telecom NZ formally launched yesterday its e-solutions business, a joint venture with EDS and Microsoft. The goal is to make Telecom an internet-based company in the products it offers and the way it delivers them. But if it fails to make a cultural leap to match its strategic ambition, it will be a mere shadow of a real e-business.
Third, Prudential, the UK's largest insurer, is expected to spin off soon shares in Egg, its internet banking business. Founded in October 1998, Egg has lost some sterling 150 million over the past fiscal year and is unlikely to make a profit until 2001. Yet analysts estimate its value at between sterling 1.8 and sterling 4.5 billion.
The Pru will use the spinoff proceeds to expand Egg and Pru businesses. The Pru has far to go to transform its traditional business into one capable of turning a profit as margins collapse under competition from e-financial services.
Every New Zealand financial institution faces the same crisis. But perhaps only ASB Bank is far enough down the internet road to use an Egg-style spinoff to spur the revolution. The rest will likely flounder.
No second chance on internet highway
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