TelstraClear vague on whether ruling will make it profitable

By NZPA

Tuesday 5th November 2002

New Zealand's number two telco, TelstraClear, said today's decision by the Commerce Commission to lower interconnection fees boded well for the company.

TelstraClear has been struggling to turn a profit since its Australian parent companies Telstra and Austar bought Clear Communications and merged it with TelstraSaturn last year.

Telstra revealed this week it had lost $106.7 million in the six months to June 30 , but expected to be profitable by the end of 2004.

TelstraClear chief executive Rosemary Howard said today's interconnection fee decision would certainly result in savings but was vague o n its effects on profitability.

"You would assume our business plan did not assume that anything like the 2.7c per minute (that Telecom used to charge) would be maintained and this is the first step towards a more competitive industry."

However, TelstraClear was still very much looking to see what the Telecommunications Commissioner decided on the cost of the all-important wholesale services it pays to Telecom.

A draft decision is due out in next few weeks.

Mrs Howard refuted Telecom's claim that the lower interconnection fee would act as a disincentive to telecommunications companies investing in infrastructure.

"Telstra and Austar would not have acquired Clear Comunications last December if the Telecommunciations Act was not coming," she said.

"This has already demonstrated good for investment in our industry in New Zealand. But it also will make sure this country has good 21st century infrastructure for investment generally. Certainly other industries will see it favourably, not only the telecommunciations industry."

While not confirming whether the lower price would mean lower costs for consumers, Mrs Howard said it would make TelstraClear a more efficient competitor.

She said the company was still trying to decide whether to try for a better price from the commission.

"The rate of 1.13c is still significantly higher than the commissioner's own stated international median rate of 0.6c per minute or if you compare it to the price across the Tasman, of 0.9c per minute."

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