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Privatisation failures: Telecom

Written By: - Date published: 9:01 am, January 28th, 2010 - 28 comments
Categories: assets, privatisation - Tags:

If Telecom were an SOE there would be cries to privatise it. These repeated crashes of XT simply aren’t good enough. Just the latest in a litany of failures since it was sold.

Fact is, we should haven’t sold Telecom in the first place. Just needed to start running it properly. Now, we’re sending profits overseas and still not getting even a half decent service.

Communication networks should be viewed as vital national assets. Not opportunities for foreign shareholders to asset-strip.

28 comments on “Privatisation failures: Telecom ”

  1. Lew 1

    Couldn’t agree more. After privatisation they so egregiously abused their monopoly position that Vodafone — at the time the largest telecommunications company in the world — was embraced by New Zealanders as the plucky underdog in the mobile market. And despite this enormous historic advantage, they still can’t run a halfway decent service.


  2. PT 2

    bs. if telecom was still state company we wouldnt have mobile at all

  3. Jewish Kiwi 3

    Telecom, like many SOEs prepped for privatisation, was undervalued, and was sold off at a fire-sale price just before great advances made in the telecommunications sector.

    As it was sold, strong regulation should have accompanied it, ensuring their network opened up for competition, as happened in the UK with British Telecom and Ofcom.

    • Lanthanide 3.1

      The ‘Kiwi share’ agreement is pretty world leading, from what I understand.

      Back in 1986-87, no-one foresaw the internet and what it would bring, so naturally there was no regulation in place to deal with that.

  4. Mach1 4

    Who’d buy, Telecom in 1999, $9, today $2.44.

  5. the sprout 5

    Privatizing key infrastructure
    = decreased capacity margins to maximize profit
    = zero accountability

  6. ghostwhowalksnz 6

    The trouble is telecom is basically a marketing company.
    The lines and wireless networks are contracted out.
    Their computer infrastructure is contracted out.
    The call centres are offshore.

    ‘telecom’ is really just a CEO and his personal staff and a letterhead that has a expensive doodle

    • Sam 6.1

      What have you just described is a neoliberal’s wet dream.

    • Bored 6.2

      Too true, of course the whole game is the maximium delivery of billable service versus the minimisation of capital inputs……thus maximising profit.

      Yesterday this was demonstrated on the FX network which in laymans terms has two core switches with little redundancy (technically this may not be accurate but in real operational terms its what happens that counts). The Telecom business rationale no doubt was to outsource the risk to Alcatel Lucent, they in term manage the risk of non delivery versus capital investment…..they might manage the risk by way of commercial insurances, SLAs that have “outs” etc. Telecom in turn tries to claw back penalties from Alcatel and hope that they dont suffer customers not paying.

      Despite all the theories from economists this is the reality of how profit is maximised and costs minimised. Delivery of service to the customers runs a very distant second.

  7. Not sure it is something a government really needs to own at this stage. It would have been nice if they hadn’t allowed it to destroy the market upon privatising it though…

    • Draco T Bastard 7.1

      Considering that the most efficient means of providing telecommunications is a single network then, yes, the government needs to own it. Else you just get the underinvestment and price gouging that has been going on since the sale of Telecom.

      • peteremcc 7.1.1

        That ignores alternative technologies.

        Copper gets replaced by fibre or satellite or wireless or… who knows?

  8. Peter 8

    Like most privatised companies in NZ – the restructuring required to make them profitable was all undertaken during the last years of state ownership. Which means we endured all the pain, and none of the gain. And then had to suffer as infrastructure got neglected for 10-15 years.

    Telecom have engaged in some serious investment in recent times, but only after the big stick of real regulation was waved above them. Paul Reynolds is not Rod Deane or Theresa Gattung.

    • Draco T Bastard 8.1

      Telecom was making a profit prior to the restructuring. The fact that it was making a profit is the reason that it was sold – Nobody wanted to buy NZ Post and ANZ bought Postbanks customers not the bank.

  9. tc 9

    The mistake wasn’t selling them but letting the network go with them.

    The network would have been licenced to them and other entrants so the playing field is level, other telcos would then be interested in NZ and investment in the network would be shared between public/private and not in telecoms hands.

    We are where we are because Telecom still control the network and the single fibre optic cable into NZ.

    The grumpy scot’s brief is probably to make it look like alot’s going on but keep fleecing/obstructing to max shareholder value.

    Joyce once again has looked the other way as he’s too busy making sure John can get to his bach at Omaha with an unecessary new road.

  10. If the government still had control of telecom, we will be still using those old phones, there will ne no mobiles and we will be paying 5 dollars a minute for overseas calls.

    • felix 10.1

      Yeah cos there was no mobile network until we sold Telecom and all the phones had rotary dials.

      Jeez Brett are you 12?

    • Draco T Bastard 10.2

      The latest exchanges were being put in place during the 1980s, new cabling was being run out and, due to the change from lead and steel wrapped cabling to plastic wrapped, there was enough being run out for two lines to each house hold. Almost the entire network had been upgraded when Telecom was sold. Since then Telecom has put in minor upgrades to the exchanges and that’s about it. The network itself has actually been degrading, as old infrastructure does, over the last few years. on top of that Telecom spent a few years ripping out fibre optic cabling that had been installed in the 1980s and replacing it with copper.

      Simple fact Brett, we have the telecommunications system we do now because government owned it and it was a public service. It’s a system that would never have been installed if it had been left to the market as it’s far too expensive.

      • blacksand 10.2.1

        I’d love to see the figures; from recollection the (Labour) Govt pumped around $3 into Telecom for every $1 or so that they (Nats) later sold it for, but I’ve not ever been successful finding these, so just a hazy recollection… Anyone?

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