Gattung says focus stays on broadband

By CHRIS BARTON, BRIAN FALLOW

Telecom chief executive Theresa Gattung rejects any suggestion the company is holding back the deployment of broadband in New Zealand until competition arrives in the residential market.

"There is no financial incentive for us to hold back the development of broadband in New Zealand because we don't get paid much for dial-up," she said.

"There is huge incentive for us to shift people from dial-up to broadband."

Asked why, despite being able to reach 83 per cent of customers in New Zealand with its fast internet service Jetstream, only 2 per cent of residential customers had taken the service, Gattung said content and applications that would drive uptake were key.

"If we could just nail a deal with Sky, we could use their content and [Jetstream's] two-way capability. We could create whole new activity centres that don't exist today - that's what we'd like to do."

She said that for the past year the company had focused on putting broadband infrastructure in place.

Gattung agreed the high cost of broadband was a factor in the slow uptake but said it was only part of the story.

* Tumbling prices for bandwidth have created a $128 million headache for Telecom.

The company yesterday put some indicative numbers around its contingent exposure to Southern Cross Cable Network, the trans-Pacific cable it half owns.

Most of Southern Cross' US$405 million of debt is covered by existing committed sales of capacity, but US$140 million is not.

In an environment in which there is an oversupply of capacity, and several international telcos are in financial distress, there is a risk that market prices for bandwidth may become further depressed, Telecom says, especially if large quantities of capacity are sold at liquidation values.

If that were to happen and persist it could impair Southern Cross' ability to repay debt.

The bank syndicate is in talks with Telecom and its equity partners SingTel (40 per cent) and WorldCom (10 per cent), which has filed for bankruptcy protection, about providing support for Southern Cross' debt.

Telecom's share of the uncovered portion of the debt would be $128 million at yesterday's exchange rate, if it were called on.