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Telecom submits final UFB proposal - promises change

18 Apr 2011

Telecom has given Crown Fibre Holdings a binding offer for its ultra-fast broadband initiative and accelerated its restructure. 

"Our proposal meets all of the key components of the UFB vision,” said Paul Reynolds, Telecom CEO. 

If accepted the restructure would see the creation of a completely new listed company, Chorus, to deliver an open-access, national, fibre-to-the-home network. 

"Chorus’ fibre services would reach 75% of New Zealand within ten years and we believe it satisfies all of CFH’s competitive pricing requirements,” said Paul Reynolds, Telecom CEO.

"Of course, we are engaged in an intensely competitive process with other bidders and the Crown must decide, so we retain a degree of caution. However, the Telecom board is satisfied that we have submitted the best possible bid terms on behalf of our shareholders.”

Reynolds says the bid represents a "once-in-a-generation opportunity for New Zealand” to create a national, entirely open-access, fibre network. 

"It would allow competition and consumer choice to flourish, would attract huge investment of up to $6 billion and ultimately contribute to the transformation of important sectors of our economy. We therefore await the Crown’s decision with interest,” said Reynolds.

If Chorus was selected as the Crown’s partner in the 25 regions remaining to be allocated, Telecom says it would move to structurally separate. 

"Our focus now shifts from negotiating with CFH to getting ready for the UFB environment, which will see us either demerging as the UFB partner or competing with new entrants in the access business,” continued Reynolds. 

"The timelines are very short for either scenario, so we must begin the work now, before the Crown has made its decision on the awarding of the UFB contract.”

Reynolds said that Telecom will change whether or not it’s chosen as the Crown’s partner. 

"The organisational changes under way will position us strongly to further reduce costs and play a significant, ongoing role in bringing world-class services to New Zealanders.”

Those changes are:

  • Telecom’s simpler business model starts with the executive team which will be reduced from ten to eight members. The new structure aims to eliminate duplication in corporate services, technology platforms, products and customer delivery processes, thereby lowering costs and enabling better service for customers.
  • Mark Ratcliffe, who has led Telecom’s UFB bid team, will now resume his role as CEO of the Chorus business unit, while retaining the lead on UFB matters with the Crown.
  • In anticipation of regulatory change and demerger, the regulated Wholesale business will progressively align with Chorus over the year ahead to provide a more seamless service for Wholesale customers. As a first move, acting CEO of Wholesale, Nick Clarke, will continue to report directly to Paul Reynolds but will step back from Telecom Group issues and will stand down from the Telecom executive.
  • A major new executive role, Chief Product Officer, is created to improve the performance of product and pricing activity across the company. Teams from Retail, Gen-i, commercial Wholesale and the entire TNZI business will move into this new business unit. 
  • Telecom’s existing five corporate centre executives - finance, HR, strategy, legal and corporate relations - will reduce to three corporate services executive roles.

"New Zealand stands on the threshold of exciting and far-reaching changes to the telecommunications industry. Whether or not we partner with the Government on UFB, Telecom looks to the future with great confidence,” Reynolds concluded.