Telecom's grip drives cash to Australia

By RICHARD PAMATATAU

Telecommunications entrepreneurs Annette Presley and Malcolm Dick are reluctantly taking their investment millions to Australia, blaming the Government for allowing the continuation of a regulatory environment biased to Telecom.

The couple own CallPlus, New Zealand's largest privately held telecommunications company, which offers tolls and data services as well as internet access through its subsidiary Slingshot.

The company was set up after the pair returned from Australia where they developed Call Australia, a toll reseller that had revenue of around A$100 million ($111.6 million) when it was sold to Robert Lauder's investment vehicle RSLCom.

At the time it had 3 per cent of the toll market in Australia. The sale price for Call Australia has been estimated at more than A$60 million and Dick's and Presley's share of that money is what they have been looking to put into New Zealand.

"The Telecom machine is too big and powerful and it is having a big an effect on what companies can do here," said Presley.

"Even Hugh Fletcher, who oversaw the Government's inquiry into telecommunications, says Telecom's lobbying powers are immense."

Fletcher, former chairman of the once giant Fletcher Challenge, told the Herald that Telecom was indeed an effective lobbyist, but then so were some of its competitors.

"This is a lobbying industry," he said.

Fletcher said companies expecting more of Telecom had to be careful not to "screw the scrum".

He said it was critical for all to invest in infrastructure and the hope was that the environment would encourage the monopoly to do this as well.

Presley said despite moving its capital to Australia, CallPlus would remain a New Zealand company for the moment, because despite the constraints it was doing okay.

It had 70 staff and more than 25,000 subscribers to its Slingshot service, she said, but could be doing a lot better.

Revenue of CallPlus is understood to be around $40 million.

Presley and Dick have taken a 10 per cent shareholding in Perth-based Swiftel.

That company was set up to exploit a niche in Western Australia's data market and is now expanding to other parts of Australia, either by creating its own network or by reselling other company's networks.

It has implemented the first commercial carrier grade IP network in some metropolitan areas and is offering rapidly provisioned, high-capacity transport services.

Dick said the opportunities in Australia were enormous, and while he liked New Zealand, it made sound sense to take the money to a better market.

Listed on the ASX, Swiftel was now moving to become a full service carrier, he said, and what was exciting was that there were big opportunities to expand the company.

Auckland internet company ihug is also about to be sold to listed Australian company iiNet.

The Perth-based internet provider has 130,000 customers and revenue of A$40 million. Ihug is one of New Zealand's oldest internet companies and the deal, involving cash and shares, is said to be worth as much as A$100 million. Presley and Dick own 10 per cent of ihug, which has 150,000 customers - 65,000 of whom are in Australia.

Presley said there was much more CallPlus could do in New Zealand but the constraints meant it had only managed to achieve 0.5 or 1 per cent of the market.

"In Australia, because the environment was better, Call Australia was able to gain 3 per cent of the toll market."

She said the regulatory environment in New Zealand, where Telecom has the monopoly on the local loop, was ludicrous and unfair.

Benefits could not happen which would enhance the business community unless there was an effective second-tier carrier market, she said, and that would not happen while Telecom retained its dominant position.

The local loop must be unbundled, otherwise New Zealand would be like Mexico, the other country in the OECD that had not opened up its networks.

It would hinder the knowledge economy notion, said Presley, because there was no point in spending lots of money on endless conferences and then trying to build $100 million IT companies when you had flawed telecommunications.

Dick said he had invested in Telecom recently because the company could not go wrong.