Good and bad news for Telecom over interconnect rates

By PETER GRIFFIN

Telecom stands to lose millions of dollars in reduced revenue if the Commerce Commission imposes proposed lower interconnect rates, but the loss could have been worse - $20 million worse.

An article in Wellington newspaper the Dominion Post quoting a JBWere report said Telecom would receive a $20 million boost in revenue and a 16c per share rise in valuation if the Commerce Commission's proposed interconnect rates were put in place.

The commission has said in a draft document that the rate TelstraClear pays to connect to Telecom's network should be halved from 2.63c a minute to between 1.21c and 1.42c a minute. Critics say the commission has been conservative by international standards and could have gone for an even lower rate.

Most analysts point to a drop in Telecom's revenue, albeit a small one, should the commission's guidelines be adopted.

JBWere telecoms analyst Andrew White declined to release the report to the Herald, but said the figures were taken out of context and were made irrevelant by the various agreements TelstraClear and Telecom had come to on Sunday.

If we applied the [Commission's] guidelines to our forecast assumptions, that would be the end result," said White.

An industry source familiar with the report said JBWere made its original calculations based on a forecast that the interconnect rate would be set at around 0.9c a minute - similar to the interconnect rate in Australia.

Telecom therefore had $20 million less to lose when the higher interconnection rate recommended by the commission was factored in and compared to JBWere's forecast.

TelstraClear on Monday attempted to table the JBWere report with the Commerce Commission, which was holding a conference on interconnection rates. But the commission disregarded the report because it was not available in the public domain.

Overall, said White, a reduction in interconnect revenue would have negligable impact on Telecom.