New Zealand - Still plenty of broadband questions for New Zealand

Telecom Investment Research Note

Synopsis

Further progress has been made since we last reported on broadband developments late last year. There is now more clarity around the structural separation of Telecom and this is producing more regulatory certainty.

Meanwhile further technical discussions within the industry have fine-tuned standardisation issues – it certainly is good to see that all parties are agreeing on standards.

However, some of the fundamental issues that have existed for over two years are still of significant concern to us, and we are increasingly uneasy about some of these. With additional contenders being added to the UFB areas rollout we overview some of the changes that will effect the market players.

Table of Contents

• 1. Synopsis
• 2. Who is driving structural separation?
• 3. Retail price will limit penetration
• 4. Plans should focus more on social and economic benefits
• 5. Can New Zealand afford a collection of small plans?
• 6. Additional UFB contenders being given away to others
  • 6.1 Vector and Auckland
  • 6.2 Central Fibre Consortium’s ten areas
• 7. A splintered approach
  • 7.1 Adds to complexity and leads to confusion
  • 7.2 Splintered infrastructure approach
• 8. Has anybody thought about the customer?
• 9. No demand-side policies at all
• 10. Some Telecom company background information
  • 10.1 Company overview Telecom Corporation New Zealand
  • 10.2 Brief financial statistics – 2011
• 11. Some Vector company background information
  • 11.1 Background information
• 12. UFB – moving into 2011 (separate report)
• 13. UFB – overview and analysis (separate report)

• Chart 1 – Telecom Group operating revenue by segment – H12009/10 - H12010/11
• Chart 2 – Telecom Group operating revenue by segment – 2008 - 2010
• Chart 3 Long term share trending Telecom New Zealand versus Vector – 2007 - 2011
• Chart 4 – Share price trending of Telecom New Zealand versus Vector – 2010 - 2011

• Exhibit 1 – Vector at a glance