Telecom could miss on UFB

The possibility of Telecom being entirely excluded from the Government's ultra fast broadband initiative (UFB) still remains and is not diminishing, Forsyth Barr broker Suzanne Kinnaird says.

"That would amount to a declaration of war on the part of Crown Fibre Holdings and the Government and would result in duplicated fibre networks.

That would probably result in sub-cost-of-capital returns for both parties.

"We would sell Telecom on such an announcement but would also sell any successful bidders - although the taxpayer would wear most of the pain in the early stages," she said.

Communications and Information Technology Minister Steven Joyce announced on Monday the first UFB partners would be UltraFast Fibre in six central North Island areas and Northpower in Whangarei.

No agreement was reached with Alpine Energy in Timaru.

CFH expected to nominate parties for negotiations in the remaining 25 UFB regions soon, Ms Kinnaird said.

"We may see a further round which effectively keeps both Telecom and the electricity utilities in the process."

The seven areas announced included just more than 14% of the UFB project.

The lack of agreement with Alpine suggested that the areas agreed to date had the most favourable introduction costs and that bidders in other areas were struggling to make the economics work, she said.

About 60% of the project was still open for bids and was made up by Auckland, Wellington and Christchurch.

A UFB consortium of Chorus (part of Telecom) and the power companies was still possible and made the best sense in managing the migration from copper to fibre, avoiding destructive high-speed broadband network competition, Ms Kinnaird said.

 

Add a Comment