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Telecom must be broken into three units: New Zealand

The New Zealand government yesterday ordered Telecom, the country's dominant phone company, to split into three units in a bid to level the playing field in the telecommunications industry.

Telecom, long accused of using its dominant position to stifle competition, will have to break up into wholesale, retail and network operations.

It will also have to give competitors access to its network linking New Zealand's 4.1 million people at the same price it will charge its own retail arm.

The government said the split should be completed by the end of March next year.

`LONG TERM BENEFIT'

"It will underpin increased competition and efficient investment for the long-term benefit of all New Zealanders," New Zealand Communications Minister David Cunliffe said.

Incentives for Telecom to develop its network should increase Internet speed and capacity, he said.

The government first signaled it wanted a split last year after it expressed frustration at the slow take-up and expensive charges for broadband Internet.

Competing Internet service providers have complained that Telecom's monopoly position in the network has hindered the introduction of faster and cheaper Internet services.

The restructuring is similar to the split carried out by BT Group (British Telecom) last year. New Zealand Telecom's incoming chief executive Paul Reynolds is a British Telecom veteran.

SEPARATION

New Zealand Telecom's chief operating officer for technology and enterprises, Mark Ratcliffe, said the separation would be demanding for the company and the industry.

The company reiterated it expected the separation would result in capital spending of NZ$400 million (US$297 million) over the next four years, with operational costs of up to NZ$40 million a year over the same period.

Both Cunliffe and Ratcliffe denied a newspaper report that New Zealand Telecom had struck an informal deal to sell its fixed-line network as part of the separation.

"We have had discussions with officials to help them prepare the minister's determination, but we have not been in any negotiations to sell the network," Ratcliffe said.

Telecommunications Users Association chief executive Ernie Newman said the decision was great news for consumers.

"It's not going to make a difference in the market tomorrow morning, but over time it is going to set up the New Zealand telecommunications market to be on a par or better than those in most parts of the world," he said.

New Zealand Telecom has little competition in fixed line phone services but international mobile giant Vodafone is the biggest player in New Zealand's mobile communications duopoly, with just over half the market.
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