Telecom NZ loses out in first NZ broadband bidding war

The New Zealand Government agency charged with building the country's equivalent of the National Broadband Network (NBN) has announced the first three companies to build aspects of the network, but has left incumbent Telecom New Zealand out of the loop.

The ASX-listed monopoly network (ASX:TEL) issued a trading halt on the New Zealand Exchange at 10.28am New Zealand time, pending the result of Crown Fibre Holdings' (CFH) announcement. However, ten minutes later, when the trading halt lifted, the telco revealed it had missed out on the first opportunities to build the network.

Alpine Energy, the Central North Island Fibre Consortium and Northpower were announced to have received the first three contracts, covering eight of the 33 candidate areas in the network.

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The New Zealand Government agency charged with building the country's equivalent of the National Broadband Network (NBN) has announced the first three companies to build aspects of the network, but has left incumbent Telecom New Zealand out of the loop.

The ASX-listed monopoly network (ASX:TEL) issued a trading halt on the New Zealand Exchange at 10.28am New Zealand time, pending the result of Crown Fibre Holdings' (CFH) announcement. However, ten minutes later, when the trading halt lifted, the telco revealed it had missed out on the first opportunities to build the network.

Alpine Energy, the Central North Island Fibre Consortium and Northpower were announced to have received the first three contracts, covering eight of the 33 candidate areas in the network.

"These three parties have displayed the best proposals including a combination of access prices, funding provisions, industry experience and financial backing," CFH chairman, Simon Allen, said in a statement released by Telecom to the ADX.

"On the basis that CFH successfully concludes binding offers with these parties, the Government and its partners will be bringing fibre to a significant part of New Zealand, which marks a real milestone for this initiative."

Telecom is among the 14 companies shortlisted for the build of the project, three of which have now been selected to build the network in eight candidate areas. The telco noted in an ASX statement that it was the only shortlisted company to submit a proposal for all 33 areas expected to be built as part of the network, with the only other equivalent submission, by Canada-based Axia NetMedia Corporation, not chosen on the shortlist due to elements of the submission not part of the government's network policy.

In its proposal, Telecom offered a co-investment with Crown Fibre Holdings for building the network in all candidate areas, submission to structural separation in July 2011, extension of the existing rural broadband initiative, and support for regulatory reform and legislative change in the telco sector. The telco said in an ASX statement that it was considering the announcement of the three selected companies in detail, but continues to believe it had the better overall offer.

"We recognise that our bid is more complicated than those of other bidders, and that Crown Fibre Holdings does not have a mandate in the areas of RBI, regulatory reform and legislative change," chief executive, Paul Reynolds, said in a statement.

"We continue to believe that a national solution is the most efficient and effective way of delivering fibre to New Zealand while avoiding duplication and waste. We stand ready to work closely with the government to make sure that we can, in the spirit of partnership, make the most of this once-in-a-generation opportunity for New Zealand," he said.

While the results have striking similarities, Telecom New Zealand's current position differs markedly to Telstra's equivalent experiences in recent times. The Australian incumbent opposed separation and submitted a non-compliant bid to build Labor's $4.7 billion National Broadband Network in 2008, in hopes of maintaining its monopoly position. The telco, however, has since recognised separation of some form as an inevitability and become a major part of the $43 billion NBN's rollout in Melbourne.