May 23, 2010 / 11:09 PM / 10 years ago

UPDATE 1-NZ's Telecom investigating structural separation

* Telecom NZ says govt plan fundamentally changes sector

* Split could be way to join Govt broadband programme

* Shares fall to record low

(Adds details, background, share price)

WELLINGTON, May 24 (Reuters) - New Zealand’s dominant phone company, Telecom Corp TEL.NZ, said on Monday it was investigating splitting itself in order to take part in a $1 billion government high speed Internet network, sending its shares to a record low.

Analysts have speculated whether Telecom would look at a separation of retail and wholesale operations from the part that runs the network in order to bid for work under the NZ$1.5 billion government plan to bring ultra-fast broadband through fibre-optic cables to the majority of homes in New Zealand.

“The Government’s initiative will fundamentally reshape the structure of the entire telecommunications industry in New Zealand and Telecom is therefore undertaking a thorough assessment of the merits of structural separation,” Telecom Chief Executive Paul Reynolds said in a statement.

Shares in Telecom, a former state-owned monopoly and New Zealand’s second largest listed company, touched a record low of of NZ$1.96 before settling 1 percent lower at $1.97.

So far this year the stock, the second biggest listed by capitalisation, has fallen 22 percent against a 4.8 percent fall for the broader benchmark NZX-50 index .NZ50.

The government plans is to part fund the building of regional fibre-optic networks to provide full telecommuncations and Internet services. Private providers would be expected to top up the balance of the building costs.

Telecom is a former state owned national operator, but its national dominance and old style copper phone line network have seen it at odds with government policy of separation between network operators and retailers of telecommunications services.

Telecom has previously said it is open to all options about participating in the government plan, and reiterated it is still in discussions with the government.

The government is expected name its shortlist of bidders to build regional fibre networks within the next few weeks, with successful companies named in the third quarter.

Telecom’s market value is about NZ$3.8 billion, with its network arm, Chorus, expected to account for between half and two-thirds of that. It has been suggested in the media that the Telecom network could form the basis for the government scheme, with Telecom holding a minority stake.

Telecom was forced by the government in 2006 to split its network, wholesale and retail arms into separate companies to provide services to smaller rivals on the same terms and prices as it does to Telecom’s retail business.

In Australia the dominant phone company Telstra Corp (TLS.AX) is in negotiations with the government about selling its fixed line phone network into a similar plan for a National Broadband Network. ($1=NZ$1.48) (Reporting by Adrian Bathgate; editing Gyles Beckford)

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