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Hot Topic NBR Focus: GMO
Hot Topic NBR Focus: GMO
2 mins to read

Bad news? What bad news? Telecom shares shoot up


Telecom investors are unfazed as Joyce wipes the "regulatory holiday" from Crown fibre bill - seeming to agree with Labour that the company will be "insulated" from regulated price cuts.

Chris Keall
Wed, 18 May 2011

On the face of it, this morning's surprise announcement that the Commerce Commission will now be able to regulate Crown fibre companies is a negative for Telecom - which is in the running for 25 Crown fibre regions, including all the major cities.

But investors seemed unfazed by today's development.

In mid-afternoon trading, the company's shares (NZX: TEL) were up 3% to $2.40, continuing their recent bull run. The broader market was up 0.11%.

News of the removal of the Telecomunications Amendment Bill's 10-year "regulatory holiday" clause drew praise from Tuanz, InternetNZ, TelstraClear, the Greens and others this morning - all of whom had worried it handed competitive advantage to likely Crown fibre winner Telecom.

Labour was seething however, with communications spokeswoman Clare Curran seeing loopholes in the new regulation that favour a winner, potentially "insulating" Telecom from Commerce Commission-manded price drops - whose cost will now be picked up by the government.

Voting with their wallets, Telecom investors seem to agree with Ms Curran's assessment.

Reynolds: comfortable
Telecom chief executive Paul Reynolds said his company was "comfortable in principle with the proposed changes. They appear to adopt a standard contractual approach to Public Private Partnership (PPP) arrangements.

Dr Reynolds added, “They should therefore provide investors with the necessary degree of certainty while also ensuring the industry is comfortable with the level of regulatory oversight.”

As well as regulatory changes included in the Telecommunications Amendment Bill, Telecom needs shareholder and debt-holder approval before it can split into separately-listed retail and network companies - a precondition for winning Crown fibre business.

BELOW Telecom's bull run over the past month, excluding today's spike (chart courtesy NZX.com):

Investors certainly seemed unfazed by today's development. In mid-afternoon trading, the company's shares were up 3% to $2.40, continuing their recent bull run. 
Chris Keall
Wed, 18 May 2011
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Bad news? What bad news? Telecom shares shoot up
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