New Zealand - impact of the complicated UFB-RBI situation on Telecom and others

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Last updated: 14 Dec 2010 Update History

Report Status: Archived

Report Pages: 7

Analyst: Stephen McNamara

Telecom Investment Research Note

Synopsis

Everyone is watching for further details of the country’s broadband plans. The level of secrecy surrounding these developments has made many observers rather nervous about their viability. There is, of course, still hope that the government will get it right, but many aspects are being ignored, and others are concealed under a layer of secrecy. The details provided in late 2010 in relation to the two successful bids has helped but is not enough to evaluate the national impact.

There are many areas that can derail this project: the lack of proper overall management, with potentially dozens of individual management teams involved; the lack of policies regarding residential access to the infrastructure; and the cost.

Fibre networks based purely on traditional telecoms and entertainment services have so far not proved to be viable. There are no demand-side policies for the government, for example, in relation to healthcare, education and so on.

At best Telecom will only be getting a proportion of the project. This will severely undermine its national business model and could seriously affect its longer-term survival. At the same time the rest of the industry remains in limbo, prolonging the lack of interest in investment in the New Zealand telecoms market. Telecom, however did receive some relief in mod December.

Without a proper national plan, the best case scenario would be initial stranded new fibre assets, which, after consolidation and write-downs, might be used in around five years’ time.

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