UPDATED, 11.29am: An analyst notes that under the legislation, a unified nationwide ultrafast broadband structure could be setup after Crown Fibre contracts are signed.
UPDATE, 11.29am :Forsyth Barr senior analyst Guy Hallwright noted the Crown and Telecom acquisition provisions on the day the supplementary order paper was tabled.
Today he elaborated that "What is interesting about the paragraph 2, page 74 text [see article below] is that it is clearly providing for a unified nationwide UFB structure to be set up following the awarding of contracts to different parties."
More so, such cooperation must take place after UFB contracts are signed. "The CFH [Crown Fibre Holdings] tender conditions precluding collaboration are still in place until contracts are awarded, unless CFH changes the rules," Mr Hallwright told NBR.
The nationwide UFB structure could consist of Chorus nationwide plus lines companies assets in certain regions.
Mr Hallwright has been pushing the possibility of this outcome for some time.
"I have always thought that some kind of unified UFB with regional asset contributions expressed by shareholdings in a single entity rather than a geographically fragmented UFB was a sensible outcome," the Forsyth Barr analyst said.
We're a crack lot we IT and business journalists.
Five days after the government tabled a supplementary order paper (SOP) to the Telecommunications Amendment Bill, providing for the possible separation of Telecom (necessary for it to participate in the ultrafast broadband project), no one had noticed provisions that allow the Crown to buy the company's network assets.
Luckily, InternetNZ policy director Jordon Carter did notice and, in another display of cooperation (what's happening here) his findings have been broadcast by Tuanz chief executive Paul Brislen.
Mr Jordan noticed that paragraph 8, page 74 of the SOP states if Telecom is selected as the sole partner for a Crown Fibre region:
"The Crown may provide UFB funding in these circumstances through investment in [Telecom network division] Chorus shares or assets. The section authorises any acquisition by the Crown of Telecom’s shares or assets pursuant to its selection as a partner."
(If Telecom does split, it envisages one company, "ServeCo" would take on the its retail and service business while the other, "Chorus2" would take on network infrastructure. Each would be separately listed on the NZX, and have its own chief executive and board).
The government privatised Telecom in 1990.
In a blog post, Mr Brislen wrote the state buying back the company's network would be "one simple solution" to solve our troubled telecommunications regime.
"I think it could work like this: we buy the network infrastructure (call it Chorus 2, although The Post Office would probably be more appropriate) and build an SOE to run it as a commercial venture," wrote Mr Brislen, name-checking Kordia.
But while the government buying Telecom's Chorus network outright would appeal to some as a clean, big-bang answer to questions over open access, two Crown Fibre contracts (in Whangarei and the central North Island) have already been signed [UPDATE: see Guy Hallwright's comments top of story].
It's more likely that the Crown will buy Chorus assets piecemeal to co-invest in specific regions.
Ménage à trois: Chorus + Crown Fibre + lines company
Notably – now that we're bothering to wade through the whole SOP – paragraph 2, page 74 [NBR's italics] says that Chorus could co-invest with lines companies:
The business acquisition exemption in new section 69XZB(1)(a) and (b) is intended to provide for a scenario in which—
• Chorus and a number of regional lines or fibre companies ( local partners are selected as the Crown’ s partners in different regions:
• in each region, a new company will be established with responsibility for the implementation of the UFB initiative:
• the shareholders in the new company will be Chorus, the local partner, and Crown Fibre Holdings Limited:
• the new company will acquire any existing fibre assets from Chorus and
the local partner
Crown could buy part of Telecom .... and Telecom could by others
That section 69XZB(1)(a) by the way, is the new section (page 40 of the SOP) authorising the Crown to buy Telecom assets.
It also includes a provision that allows Telecom to go shopping, authorising:
Any acquisition by Telecom of the shares of any telecommunications network company (whether on a minority or an equal basis or otherwise) as part of an arrangement with the Crown or a UFB partner (or both) under the UFB initiative.
"Telecom can buy with impunity. There's no M&A [mergers and acquisition] oversight," Mr Brislen told NBR.
Given the new provisions that have (cough) just come to light, it's easier to imagine the scenario of, say, a Telecom-Vector partnership in Auckland, as recently floated in NBR.
Incidentally, although the bill doesn't use the word nationalisation, it does provide for a partial re-nationalisation of Telecom. Once again, the opposition can land jabs about rushed process (the SOP is being fast-tracked through the select committee review process), and about the way the Crown Fibre process is framed, with suspect provisions like the 10-year holiday (or "forbearance") from Commerce Commission scrutiny). But in terms of enthusiasm for state intervention (albeit in the greater cause of building better infrastructure for business), Mr Joyce has again out-Laboured Labour.
Telecom shares (NZX: TEL) were down two cents to $2.18 in late morning trading.
(Read the full SOP here.)
