Telecom seen as a takeover target

By NZPA

Tuesday 26th November 2002

Telecom is still a "tempting international takeover target" despite its acquisition of Australia's number three carrier AAPT, trans-Tasman telecommunications specialist Paul Budde says.

Telecom runs the risk of losing its grip on local residential lines after Telecommunications Commissioner Douglas Webb examines whether the local loop should be "unbundled" next year, allowing other companies to rent the lines, Mr Budde said in his latest report.

The report, titled 2002 Telecommunications and Information Highways in New Zealand, says that with no significant infrastructure developments by TelstraClear, Telecom has been unchallenged and remained the dominant player in the all-important lucrative local loop market.

That could be set to change, however, with Telecom's share of the contestable fixed voice market forecast to drop 1.2 percent in 2003, from 78.8 percent in 2002. Telecom had an estimated 85.4 percent market share in 1997.

And in the mobile market Telecom's market share has been slashed by competition from Vodafone.

Mr Budde said the entry of third mobile phone operator Econet looked unlikely before 2004.

The second-tier telecommunications companies have only kept their heads above water in 2002 and while the new interconnect rates would offer some long-term certainty, most of that was too little, too late, Mr Budde said.

He forecast further job losses in 2003 through continuing rationalisation and restructuring of Internet Service Providers who either folded or were swallowed up.

Interest in mobile data remained limited. It remained to be seen whether content would be up to attracting big numbers of users and pave the way for third generation technology.

Higher value data and broadband services were going to take off and would be significant revenue earners for telecommunications operators in the future.

The report forecasts 7.8 percent growth in telecommunications services revenue in 2003, up from 5 percent this year.

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