Vodafone's subsidy to rival set to climb while govt mulls new TSO scheme

Tuesday 10th November 2009

Vodafone New Zealand, the country’s largest mobile phone network operator, will probably have to fork over more money to rival Telecom Corp. after the regulator released its draft determination on the cost allocation for providing basic phone services to rural customers.

The Commerce Commission has decided Vodafone’s share of the Telecommunications Service Obligation (formerly known as Kiwishare) is 26.17%, up from 26.07% last year. Vodafone had to pay $19.46 million to Telecom last year.

TelstraClear NZ Ltd., the New Zealand unit of Australia’s Telstra Corp., will have to pay Telecom 6.38% of the obligation. The regulator will make a final decision on the amount of the levy at an as-yet undisclosed time.

The TSO’s predecessor, Kiwishare, was put in place in the early 1990s when Telecom was privatised to protect the approximately 60,000 customers deemed to be not commercially viable.

In September, the government announcement changes to the levy system in a move to remove any gain Telecom can get from the subsidy, and will use a new levy scheme to bankroll its rural broadband initiative. Under the proposed scheme, all operators will be able to compete for the non-viable customers’ service.

Last week, Telecom slammed the government’s proposal saying its assumptions were “flawed” and denied it had benefited from the scheme.

The country’s largest phone company estimates the obligation cost the company $74.3 million this year, according to John Wesley-Smith, Telecom’s general manager group industry and regulatory, who wrote to Telecommunications Commissioner Ron Paterson in September.

Shares in Telecom were unchanged at $2.52 and have climbed 10% this year.

Businesswire.co.nz

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