Telecom named for Crown Fibre 'priority negotiations'

Crown Fibre Holdings (CFH) has announced the selection of a further three parties for priority negotiations in the ultra-fast broadband (UFB) initiative.

The three parties are:

• Telecom Corporation of New Zealand Limited: covering 25 candidate areas;
• Enable Networks: covering Christchurch and Rangiora ; and
• Flute Joint Venture represented by Aurora Energy Limited: covering Dunedin
   

Two of the leading lines company contenders - Vector (Auckland) and TeamTalk's CityLink (Wellington) will have to be nervous that Telecom has got in the door before them. 

Especially as the first round of priority negotiations lead to binding contracts in two of the three cases.

Crown Fibre Holdings has confirmed that Auckland and Wellington are among the areas covered by its priority negotiations with Telecom.

If Telecom's negotiations also lead to a sealed deal with the government, there may be slim pickings on the table by the time parties for the third round of priority negotiations are announced.

Dr Reynolds has previous told NBR that it would be "bonkers" to proceed with his company's bid - which he described as a national one - without our largest city, saying "Auckland is half the country." Spinning off Chorus would not be feasible without the main centres.

Immediate bounce for Telecom shares
Investors seemed to welcome the news, with Telecom shares (NZX: TEL) jumping 2.4% to $2.13 in early trading, partially reversing their fall last week as the first two Crown Fibre contracts were announced.

Two gone already
There are 33 Crown Fibre regions in total.

The government has already signed a contract with Northpower, which covers one region (Whangarei).

And 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.

That means seven Crown Fibre regions are already spoken for.

A third Crown Fibre contract is pending in an eighth region, Timaru, where there are unexplained delays in negotiations with lines company Alpine Energy (asked about the reason for the hold-up, a Crown Fibre spokesman told NBR: "That is a matter between CFH and Alpine Energy. Alpine Energy remains a shortlisted party and CFH is in discussions with Alpine.")

That leaves 25 of the 33 Crown Fibre regions still up for grabs, including all of the major urban centres.

Labour: Telecom has it in the bag
It is apparent by today’s announcement that Telecom will win the contract to lay fibre in 25 out of 33 regions, including Wellington and Auckland. It is still possible that Telecom could win Christchurch and Dunedin," Labour Communciations spokeperson Clare Curran said in reaction to this morning's announcement.

"That leaves Telecom with at least 70% and possibly up to 84% of the UFB network.

“That all adds up to an dominant monopoly in charge of our newest network, with a history of under-investing in its networks, and no great incentive to transfer people from the existing copper network to fibre."

Labour has called on the government to release the details of its ultrafast broadband contracts as soon as the commercial decisions have been finalised.

This will reassure the public that the best deal has been done, Ms Curran said.

Telecom: open to partnerships
Telecom has said it sees potential for its Chorus division (which would be spun-off into a separately listed company if it wins) to partner with other public or private companies in the UFB initiative - opening the door to national involvement even if it does not win all the remaining contracts.

This morning, chief executive Paul Reynolds released a statement re-emphasising Telecom's willingness to partner with others.

"CFH is also open to these parties partnering in their candidate areas in order to deliver greater infrastructural utilisation. Such partnering will be a matter between the parties,” CFH chairman Simon Allen said this morning.

“Negotiations in the next phase will be focussed on the three parties named today, as well as Alpine, but it should be noted that discussions will still continue with all respondents previously shortlisted," Mr Allen added.

Next recommendations first quarter of 2011
As ever, the Crown Fibre timetable is emerging in dribs and drabs.

“I look forward to receiving CFH's next recommendations on binding offers in the first quarter of 2011,” Communications Minister Steven Joyce said in a statement this morning.

First fibre in the ground
Mr Joyce also pledged that the "Tomorrow, the first government-funded fibre will be going in the ground," presumably as part of the $200 million in combined deals with Northpower (which has already cabled fibre to homes in Whangarei with its partner TelstraClear) or WEL.