Newcall quits NZ telco business in anger

Since its launch in 1998 Newcall has focused almost exclusively on the small to medium business market. CEO, Guy Pierce, says a truly competitive telecommunications industry - as they have in the United States - would have left plenty of room for the smaller innovative telcos like Newcall.

"Instead, due mainly to its contestable nature, which favours only the big players, the smaller telcos are finding it increasingly difficult to survive in New Zealand."

"Adding to the group's difficulties is the worldwide trend of diminishing toll charges, made worse in New Zealand by the lack of support for true competition, which in some instances has seen retail toll prices below their wholesale cost. This trend has resulted in telco stock values falling internationally."

Newcall says a large portion of its phone customer-base is being sold off to TelstraSaturn subject to shareholder approval. The price for the customers has not been disclosed.

This is a reverse of what happened in February last year, when Newcall boosted its customer base by 10% when it bought customers from Telstra.

Mr Pierce says the company expects to sell its remaining customer base to another telco in the near future, and is also looking to sell off its internet service provider, Iprolink, which it acquired in January 2000 for $3.6 million in cash and shares,

"Without a telecommunications arm it would no longer make sense for NGL to maintain an ISP," says Mr Pierce.

Newcall now plans to concentrate on developing its remaining assets, which include a billing system, a 75% shareholding in electricity reseller Energy Online, and its Singapore operation.

"We see potential for selling our billing system to the service and utility sectors both in New Zealand and abroad," says Mr Pierce. "However, our strongest performer at this stage is Energy Online which grew its customer base from 300 to over 10,000 in the 12 months to December 2000.

"This year we will again focus on EOL's growth as we are convinced that once we reach our targeted customer base later in the year, NGL's share value should be enhanced."

NGL chairman, David Sun, says the 'last straw' for the company was last month's telecommunications report, which he says lacked any real support for smaller telcos.

"The Government's failure to appoint a regulator, or to place restrictions on predatory pricing policies, would certainly not be allowed in open markets like the United States and Singapore which are now much more attractive to foreign investors," says Mr Sun.

"We have concluded that New Zealand is no longer the place to invest any further in a telecommunications company, especially when there are these other markets that afford investors much more potential, and far less risk and exposure.

"Instead we will be concentrating our efforts and investment in Singapore which, unlike New Zealand, wants an open and expanding telecommunications industry."

NGL listed on the New Zealand sharemarket in October 1999 via a reverse takeover of New Zealand Salmon. Its principal shareholder is Charoong Thai Wire & Cable Public Company.

In the half year to the end of June 2000 Newcall lost over $4 million, as margins on its phone and internet business were squeezed.

The company's share price has been languishing, falling from a high of around 72 cents in February last year to recent trades of under 10 cents.

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