New goalposts cost Telecom $115m

By PETER GRIFFIN

A new method of calculation forced on Telecom has reduced its estimate of the Kiwi Share obligation cost by nearly $115 million.

Telecom had previously presented a figure to the Commerce Commission of $226.5 million - its estimate of the loss it faced in providing basic telecoms and internet services nationwide in the six months and 11 days to June 30. That figure was calculated assuming Telecom's weighted average cost of capital stood at 13.2 per cent.

But the commission asked Telecom for figures based on a cost of capital of 8.2 per cent, giving a total of just $112 million for the same period.

The commission will now do its own sums to determine the figure to be split between the main industry players based on market share, but Telecom is still trumpeting figures based on the old methodology. In a statement it said the recalculation had shaved just $17 million off its Kiwi Share estimate calculated over a year - from $425 million to $408 million.