In shock move, Crown Fibre opens Auckland UFB negotiations with Vector

UPDATE: Read Telecom: company split 'extremely challenging' without Auckland

On December 13, Telecom was named the priority bidder with Crown Fibre Holdings in 25 of 33 UFB regions, including unopposed runs at the two largest, Auckland and Wellington. All up, Telecom looked on track to bag 85% of the project.

Opponents howled.

But suddenly, the game has changed. 

This morning, Crown Fibre Holdings announced it had opened priority negotiations with Vector in Auckland.

Communications Minister Steven Joyce immediately released a statement supporting the move, saying “The government has always been keen on a competitive process that will deliver the best value for taxpayers and the best outcome for users."

The move is doubly surprising as it comes just a day after supplemental orders were added to the Telecommunications Amendment Bill allowing for the structural separation of Telecom - a move seen by many as a precusor to the company being handed the lion's share of UFB contracts, especially given its fast-track schedule.

Give me Auckland or give me death
Telecom chief executive Paul Reynolds has previously told NBR that his company could not participate in the UFB if it did not win Auckland.

Telecom's bid was a national one, said Dr Reynolds, and Auckland represented "half the country."

Now, if it's to secure Auckland, the company will have to sharpen its pencil.

“Auckland is attractive for UFB investment in terms of its population and likely demand profile, with a preponderance of businesses, health premises and schools. It is great to have two parties, Telecom and Vector, actively seeking to become the Crown’s partner for this Candidate Area,” Crown Fibre Holdings chairman Simon Allen said this morning.

One telco industry insider mulled another possibility: that Mr Joyce was nudging Telecom and Vector toward a joint venture.

First to LFCs hold board meetings
The government has already signed contract to co-invest with Northpower, whose Local Fibre Company (LFC) will be known as Whangarei Local Fibre Company.

It has signed another with the WEL-led UltraFast Fibre Ltd that covers Hamilton, Cambridge, Te Awamutu, Tauranga, New Plymouth, Wanganui, Hawera and Tokoroa, taking in six Crown Fibre regions.

A third Crown Fibre contract is pending in an eighth region, Timaru.

This morning Crown Fibre's Mr Allens said Whangarei Local Fibre Company and UltraFast Fibre Ltd would hold their first board meetings this week.

Full scale roll-outs are expected to begin in the second quarter (Northpower/Whangarei Local Fibre Company actually began its deployment before Christmas as a continuation of the power company's existing fibrre to the home project ... see pricess photo here).

Vector up, Telecom down
Telecom shares (NZX: TEL) were down 0.9% to $2.21 in early afternoon trading.

Vector (NZX: VCT) was trading up 1.6% to $2.54.