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Reynolds: $10m compo, Alcatel-Lucent 'on notice'

Tue, 23 Feb 2010

Speaking in Auckland this afternoon Telecom chief executive Paul Reynolds said he had put his company's network partner, Alcatel-Lucent "on notice".

Dr Reynolds, who described the French-based company as the organisation that "designed, built and runs XT" said he personally telephoned Alcatel-Lucent's chief executive Ben Verwaayen to inform him of this fact yesterday.

The Telecom boss was short on detail of just what "being on notice involves", however.

$10 million compo deal
Compensation details were also announced for the roughly 200,000 XT customers affected by this week's outage, which is still unexplained.

Business customers Taupo southward, regardless of size will get a "loyalty bonus" of 50% off their XT bill if they stay with Telecom over the next three months.

Residential customers Taupo southward will receive 33% off their on-account bill, or a 33% bonus each time they top up over the next quarter.

No walk-away waiver
Asked if Telecom would waive break fees for those who preferred to leave XT, Dr Reynolds said only that customers were welcome to talk to a Telecom rep on a one-to-one basis.

Consumer NZ said yesterday that customers who had suffered a third or fourth outage "probably" had grounds to leave under the Consumer Guarantees Act. However, the act's relatively general wording, and the unique circumstances, like mean a test case would be needed.

Profit hit
Today's compo deal raises Telecom's total tab for XT outages to $15 million.

The telco has already said XT  payouts and other costs associated with the outages would push its full-year profit forecast to the bottom of its range.

No more bodies ... probably
Dr Reynolds confirmed that CTO Frank Mount's resignation this morning was directly related to the American's role overseeing the design of XT.

Asked if there were more resignations on the way, Dr Reynolds replied. "I don't know. I don't think so". A predicted boardroom reshuffle was "up to the board".

Telecom had no input into the decision of Alcatel-Lucent country manager to resign, said Dr Reynolds.

However, from this point on, Telecom staff - and particularly its newly elevated CIO David Havercroft - will now have "stronger day-to-day input" to the running of XT.

Mr Havercroft ran Telecom's crisis team during all four outages, said Dr Reynolds. He now takes responsibility for all network and IT operations.

And when asked if he thought his own job was secure, the Telecom chief executive said he wanted to lead the company through the good times and the bad.

Telecom shares (NZX: TEL) finished the day down six cents or 2.54% to $2.30, skirting their 52-week low.

See the live blog of today's even below for more.

Quin, Telecom chief executive Paul Reynolds (centre) and Gourdie field questions.

No pressure. Vodafone staff, no jokes about that sign.

Sundry extra stuff: Dr Reynolds was also asked if departing CTO Frank Mount - who earned $1.042 million last year - would get a payout. He replied: "No".

There was also the now familiar round-and-round the mulberry push discussion about whether more radio network controllers (Vodafone has six to Telecom's two) would help with fail-over, or not. RNCs were described as mini data centres, with multiple redundant systems. But surely logic dictates that more RNCs would mean each would control - and contain failure to - a geographically smaller area. Telecom is installing two more RNCs next month - a move it says was always scheduled.

Again, it was asked if Telecom still intended to turn off its CDMA network in 2012. It does; the bandwidth is needed for anticipated growth on XT.

3.51pm: Question: Is Vodafone's setup superior because it can fall back on its compatible 2G network if its 3G network fails? Reynolds: I don’t think any operator could take whole 3G load and put it on 2G network. It would overload. It's not a practical benefit.

"Who are you saying's got defensive body language?" Telecom Gen-i Australasia chief executive Chris Quin (left) and Telecom Retail chief executive Alan Gourdie ahead of the press conference. Despite the pose, both have been relatively open, touring customers in the South Island and beyond to canvas them about compensation. Mr Quin, particularly, has given his personal contact details to hundreds via his email updates.

3.50pm: Question: Are you worried XT problems will harm your Crown fibre bid? Reynolds: "I hope not". Hopes govt will note Telecom's Chorus division is building a huge fibre-to-the-node network on time, and working well.

3.50pm: Question: can you quantify putting Alcatel-Lucent on notice. Are there deadlines involved? Reynolds: No. 

Follow-up: Have you been talking to Alcatel-Lucent's competitors? Reynolds: All competitors want to talk to us, and we’ll talk to them. 

3.48pm: Is the seat of Telecom board member (and former Alcatel-Lucent Asia Pacific boss) Ron Spithall safe? Reynolds: Spithall been a valued board member for some years. It's up to the board.

Asked about an analyst's attack on Telecom's selection of Alcatel-Lucent over what the analyst called more experienced rivals, Reynolds says A-L has built networks for Verizon and AT&T in the US, in France, and recently signed a deal in China. But he wants A-L to get it right in NZ.

3.40pm: Question: how many on XT now? Reynolds - 450,000. Follow-up: how many left? Reynolds - Doesn't know how many have left. Quin: fewer than 500 connections in corporate market lost. Reynolds: Looked at customer numbers yesterday and they were rising.

3.30pm: Asked about the call from Communications Minister Steven Joyce last night, Reynolds says he called the minister, not the other way around.

3.27pm: Question: to Reynolds - how do you feel about your own future?

Reynolds: As the CEO I’m looking to lead the company through the good times and the bad.

Follow-up question: If there’s another outage?

Reynolds: That’s up to the board.

3.26pm: More resignations on the way. Reynolds: I don't think so. Not that I know of.

3.25pm: Question - Will you waive break fees for those who do want to leave XT? Reynolds talks around the question; says Telecom willing to speak to customers one-to-one.

3.23pm: Question: who will pay for the compo? Reynolds: Telecom will pay for the compo, Alcatel-Lucent will "fix the network". 

3.20pm Question: How much new compo cost? Reynolds: $10 million. [The previous outage resulted in $5 million compo].

3.20pm: Quin: For three months from 1 March, all business customers from smallest to largest enterprise will have 50% taken off voice, txt and data fees.

3.14pm: Gourdie: For the next three months, all XT customers south of Taupo who “stayed loyal” will get a credit that works out to 33% of their mobile plan, including extras like txt and data.

Prepay - 33% bonus every time they top up. Applies to those with billing addresses Taupo southward.

3.12pm: Reynolds: Effective immediately, I have personally put Alcatel-Lucent on notice today.

Alcatel-Lucent have the job of designing, building and operating XT on our behalf.

Spoke to Alcatel-Lucent global CEO last night to tell him on notice. Telecom staff will take a more hands on role from today.

3.10pm: Reynolds goes into lengthy detail about causes of the four XT outages so far. No new info. All have involved the Chch RNC, but all different causes.

3:08pm: A mea culpa - paraphrasing:

Enough is enough. Today is about people who pay our wages at Telecom - the customer.

Today is about the actions we’re taking to restore people’s faith in XT, and in Telecom.

That requires action on a range of fronts. Action will be required by us, and our partner Alcatel-Lucent.

There’s no hiding a series of major outages and interruptions. One is to much, several are intolerable.

Each has had separate causes but all have had a common factor being associated with Christchurch.

3.05pm: Reynolds enters,sits flanked by Gen-i boss Chris Quin and head of retail Alan Gourdie.

3.03pm: There are seven TV cameras here. Didn't know there were that many networks. My little patch feels invaded.

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Reynolds: $10m compo, Alcatel-Lucent 'on notice'