Telecom New Zealand
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Telecom New Zealand NZX: [TEL]
Telecom was formed in 1987 from a division of the New Zealand Post Office and privatised in 1990. The selling price is still considered by many to be extremely low, given that Telecom had a monopoly of all phone lines in New Zealand at the time. Others consider that the capital requirements to modernise the network were better provided by private enterprise than the government.
History
1987
- The New Zealand Post Office divests itself of the newly created Telecom which was created as a State Owned Enterprise (SOE) on March 31.
- The Government-owned Telecom Corporation is to have a commercial focus. It purchases telecommunications assets of the Post Office for NZ$3.2 billion and work begins on improving the services and network.
- Telecom launches its 025 mobile network and CDPD mobile data network. The New Zealand telecommunications market is progressively deregulated.
1990
- Telecom is sold to two United States-based telecommunications companies, Bell Atlantic and Ameritech, for NZ$4.25 billion [link]. The two companies today still have part-ownership of the company #redirect .
- Clear Communications (now TelstraClear), begins the first network to compete with Telecom.
1991
- Telecom lists on the New Zealand, Australian and New York stock exchanges.
1992
- Telecom implements a NZ$200 million dollar fibre-optic cable connection between Australia and New Zealand.
1993
- Ameritech and Bell Atlantic reduce their shares in Telecom to a combined 49.6%.
- BellSouth (now Vodafone) sets up the first mobile network to compete with Telecom.
1995
- Clear Communications reaches an agreement on local service interconnection.
- Telecom creates First Media Ltd to develop a cable television network across Auckland and Wellington, called First TV
1996
- Telecom establishes a telephone exchange in the United States for international traffic.
- Telstra New Zealand Limited (now TelstraClear) sets up operations in the New Zealand business market.
- Telecom launches an Internet Service Provider, Xtra, which is New Zealand's largest internet service provider today.
1997
- Saturn Communications Limited (now TelstraClear) enters the residential phone market in Wellington.
- Telecom buys back NZ$1 million of its shares.
1998
- Ameritech sells down its 24.8% shareholding in an international public offering.
- Bell Atlantic issues exchangeable notes that are convertible into the Telecom shares that it owns.
- Telecom celebrates 500,000 mobile customers connected to its mobile network.
- Southern Cross Cables Limited, half owned by Telecom, announces plans to build a fibre-optic cable linking New Zealand with Australia and North America.
- Vodafone New Zealand buys BellSouth and starts a campaign to attract Telecom customers to its network.
1999
- Telecom establishes a presence in Australia, buying 78% of AAPT, Australia's third-largest telecommunication company.
- Telecom upgrades its nationwide payphone network to smart card technology.
- Telecom's fast Internet service based on ADSL technology, called JetStream, is launched and rolled-out progressively in local exchanges.
- Telstra merges New Zealand operations with Saturn to form TelstraSaturn Limited.
2000
- Xtra signs up its 300,000th customer.
- Telecom Mobile, the mobile division of Telecom, celebrates 1,000,000 customers connected to its mobile network.
- The New Zealand Government conducts a comprehensive review of the regulatory regime.
- Telecom raises its AAPT shareholding to 100%.
2001
- The Government passes the Telecommunications Act, setting up a Telecommunications Commissioner.
- TelstraSaturn buys Clear Communications to form TelstraClear.
2004
- Telecom won the Roger Award for The Worst Transnational Corporation operating in New Zealand.
2005
- Telecom releases Bitstream, a 256kbit ADSL service sold at wholesale prices (at approximately 10% below the retail price) to other ISP's.
- Telecom's mobile customers find out that their privacy and security is not safe on the Telecom network, when a phreaker named ^god releases an exploit to the media allowing access to almost anyone's voicemail.
- Telecom posts a profit of $NZ 916 million.
2006
- May 3: The New Zealand Government announces that it will require Telecom to unbundle the local loop to provide "access to fast, competitively priced broadband internet".[link]
- May 4: NZ$ 1.1 billion of its market capitalisation was wiped off following the announcement. [link]
- May 9: An audio clip recorded on March 2 was released involving Telecom CEO Theresa Gattung admitting the use of confusion as a chief marketing tool in the industry. The March recording also dismissed the New Zealand Government as "too smart to do anything dumb" with regards to regulation. [link]
- May 19: A video titled "Telecon" incorporating the May 9 audio clip and a dubbed Telecom ad was released. Telecom got it removed from YouTube but it is still available at other locations. [link] [14MB Quicktime]
- June 27: Telecom announces it will voluntarily separate its business into two operating entities - Wholesale and Retail. [link]
Telecom Mobile
Telecom Mobile is New Zealand's second-largest mobile operator, with about 49.5% market-share, behind Vodafone. Telecom operates AMPS, Digital D-AMPS/TDMA and CDMA, including EV-DO mobile phone systems in New Zealand. AMPS and D-AMPS service is sold under the 025 brand and CDMA services are sold under the 027 brand. Telecom is set to turn off the 025 network in 2007. Most of its customers have migrated to the 027 network. The 027 CDMA EV-DO network is marketed as T3G, a 2 MB third-generation mobile system.Customer numbers and market share
The following shows customer numbers and market share information for Telecom Mobile, including both 025 and 027 customers. Since Vodafone New Zealand took over BellSouth in the late 1990s Telecom's market share has dropped every year.In 2005 Telecom launched New Zealand's first 3G network, using the brand name T3G. Being first into the 3G market, along with aggressive marketing and a $10-a-month text message package, has allowed Telecom to claw back some market share from Vodafone. In November 2005 Telecom reported 72,000 new mobile phone customers, compared to 27,000 for Vodafone.
| Quarter | No of customers | Market share % |
|---|---|---|
| December 1999 | 858,000 | 68.37% |
| December 2000 | 1,150,000 | 60.43% |
| December 2001 | 1,379,000 | 56.94% |
| December 2002 | 1,229,000 | 50.18% |
| December 2003 | 1,298,000 | 49.95% |
| March 2005 | 1,520,000 (approx) | 44.6% |
| November 2005 | 1,600,000 | 46% |
Recent information shows Telecom to have 1.6 million customers, against Vodafone's 1.9 million.
Criticism
Telecom has been criticised for using its status as a government-protected monopoly to charge high prices whilst providing poor service, [as an example]; on XTRA Jetstream it can cost over $1200 to download 100GB of data in a month, plus monthly access fees (at residential rates, business is more expensive). While there are competitors in the cellular and toll-call markets, it has proved difficult for other companies to establish residential services due to Telecom’s control of local loop services. Telecom has also leveraged its control of residential services to establish the country’s largest ISP, Xtra.Competitors allege that Telecom engages in unfair practices to prevent competition from arising, and resells broadband capacity to Xtra at lower prices than to other ISPs.
In July 2005, two dozen Internet service providers formally complained to New Zealand's Commerce Commission via a letter. [link] Notably absent from the list of signatories were Telecom’s ISP, Xtra, and several ISPs owned by TelstraClear.
Telecom’s response
In [an article] published on 25 October 2005, Telecom claimed that the reason for poor broadband uptake in New Zealand was because of free local calling. Telecom stated “customers have the option of moving to faster broadband services, but free local calling creates a disincentive by allowing them to use dial-up for as long they want.” However, internet experts disagreed and even the secretary of the OECD [took a shot] at Telecom.Late 2005, early 2006
Telecom failed to reach their self imposed goal of around 83,333 wholesale broadband customers by the end of 2005. During her opening address to parliament, Prime Minister Helen Clark criticised the state of the internet in New Zealand [link]. This was followed by extensive criticism in the media such as in two high profile television programmes, in two episodes of Campbell Live, during which Teresa Gattung was grilled by the show’s host, and an episode of the New Zealand edition of Sunday. Critical articles have been published by various magazines and newspapers, including the largest newspaper, the New Zealand Herald. Of significance, many of these were lengthy and high profile articles compared to many previous articles critical of Telecom—among the most noticeable of these was published by the National Business Review, in which it was stated that “Far from being ‘Xtraordinary’, as its multimillion dollar advertising would have you believe, Telecom is strangling the nation’s advancement.". While in Wellington for an ICANN meeting, Vint Cerf was reported to have made a personal visit to David Cunliffe, the telecommunications minister where it is believed he recommended that Telecom be unbundled [link] [link]. The New Zealand Government investigated whether it needed to force Telecom to unbundle the network, thereby allowing other companies access and improving broadband service for consumers.In a decision by the New Zealand Government on May, 3 2006 - Telecom will be forced to unbundle the local loop. This will allow competitors (such as TelstraClear and Ihug) to offer broadband and other communications services throughout New Zealand by installing their own equipment in the exchanges. [link], [link]. The announcement of this decision was rushed as the documents were leaked to Telecom who advised the government of the leak. It was widely reported that the government had intended to make the annoucement during the budget 2006. Most of Telecom's competitors and many independent commentators such as InternetNZ and Paul Budde have applauded the decision. Legislation will have to be introduced to enable the regulatory changes. Three other political parties, New Zealand First [link], the Green Party [link] and United Future [link] all appear to support the decision which would give the government at least 66 votes if there are no votes against the party line.
Following the events of May 2006 the company was hit by a series of other negative news. Firstly, the Commerce Commission announced that it would rule on the contentious issue of mobile telephone termination charges. Then, in early-June, the Commission announced that calls between a landline and a mobile phone within a geographically defined boundary could be connected free of termination charges. The ruling allows Vodafone to establish a mobile phone product which can also provide free local calling, in direct competition with a product for which Telecom has long had a monopoly. Then, the Commerce Commission granted two of Telecom's competitiors, CallPlus and iHug, access to an unrestricted, Unbudled Bitstream Service, which would allow them to provide competitive broadband services.
Finally, the company announced the voluntary separation of its business into two separate entities - Wholesale and Retail [link]
Effects of monopoly
The New Zealand Treasury has estimated the economic loss from Telecom's monopoly to be in the region of $50–$250 million a year. Another study commissioned in 1998 by rival company Clear (now TelstraClear) estimated that the loss was $400 million a year.External links
- [Telecom New Zealand Website]
- [Telecom's ISP Xtra]
- [Yahoo! - Telecom Corporation of New Zealand Limited Company Profile]
- [Telescum - Telecom New Zealand Protest Website]
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