Tuesday, May 24, 2011

Who would have thought it

Back in the mid 2000s when I worked for Telecom New Zealand subsidiary AAPT I tried to convince Telecom that structural separation would be in its strategic interest, and that following that separation Telstra would be able to be forced to follow. This culminated in my 2008 paper for the TJA.

At the same time I was advocating in Canberra that while structural separation was desirable it was hard to force onto incumbent telcos but would be possible at the time of new investment in fibre access networks.

Now, on top of the developments with the NBN and Telstra in Australia comes news that Telecom NZ subsidiary Chorus has won the FTTH contract for most of the country and will "de-merge". That this announcement was made by Paul Reynolds is somewhat interesting. In her book Bird on a Wire former CEO Teresa Gattung makes the claim that Telecom was close to separating before her departure but the incoming CEO from the UK placated the Board and convinced them that the line could be held at operational separation.

The financial models in the two countries are different, and the timescales are different. But now in Australia and New Zealand the former incumbents will not own the access network.

For the financial press, watch this space. Telstra's strategy in the medium term has to be to find a buyer for Telstra Clear. That could be very easily Vodafone or SingTel. It could very easily be one of the up and coming Australian Service Providers like iiNet or TPG.

Once divested of Clear and with separation progressing Telstra can then move to a merger of the retail companies. It would suit their objectives in the corporate market and would provide reasonable leverage for both in the residential market (growing the addressable market of the same applications and services). the Telecom and Telstra mobile networks also now fit well together.

Novae Meridianae Demetae Dexter delenda est

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