Telecom shares (NZX: TEL) closed at all-time low of $2.17 yesterday as investors took fright at the government’s new rural telecommunications plan.
Today, the company’s shares have hit a new low of $2.13 in late trading.
Under the rural plan, Telecom will lose the $23 million or so a year it received from rivals under the TSO Levy subsidise the cost of servicing around 60,000 so-called commercially non-viable rural customers.
A new scheme, to be introduced next year, will see all phone companies collectively contribute $50 million a year for the next five years under a Telecommunications Development Levy (TDL).
$42 million of the $50 million-a-year of the TDL will go toward a contestable fund to expand rural broadband.
Analysts give Telecom a good shot at winning at least some of the TDL money as telcos shortly begin to compete for the right to tap the levy and lay rural fibre.
However, Telecom still sees the revamp as a net negative. Yesterday, it notified the NZX that the rural telecommunications reform could shave up to $56 million off ebitda for each of its 2011, 2012 and 2013 financial years.
Projected ebitda for 2011 is around $1.73 billion.
Comments and questions2
Two Dollars, here we come!
Once it's below $1.50 I vote for the govt buying it back. Then we can do away with all this nonsense about rural broadband and fibre and just build it ourselves.
On a sombre note, should we pass around the hat for the senior exec? Oh wait, that's right... they will still earn millions of dollars and get a bonus based on "performance" which I can only presume relates to their ability to sob loudly in front of the board.
I can’t think of a company that has a residual of public ill will so deep as telecom. It’s pointless to list the number of bad experiences I have had but I remember them well. As of now there people I know in Havelock North Hawkes Bay, a modern and prosperous town, who can’t get broadband because there is no capacity at the exchange. I have the so called “fastest broadband” and at peak times it is little better than dial up in speed and constantly disconnects. If Telecom had put the same energy into building a decent modern network instead of screwing every cent they could out of NZ customers they would not be where they are now. I say let them crash and burn so a decent operator can take over their crumbling empire and give NZ a fair go.
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