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Telecom NZ finally scores piece of UFB project

After making a final submission to participate in the rollout of the Ultra Fast Broadband project, the telco's Chorus business has been chosen to deploy fibre to 24 of 33 candidate areas

Telecom NZ (ASX:TEL) has finally secured a piece of the ultra fast broadband (UFB) initiative with the telco’s Chorus business chosen to deploy fibre in the remaining 24 of the 33 candidate areas.

Chorus has been selected with Christchurch City Holdings’ (CCH) fibre business Enable Networks, both of which were shortlisted for the project in December, and will join Northpower Limited and Ultrafast Fibre Limited (led by WEL Networks) to deploy and operate the UFB build.

The company charged with the rollout of the UFB, Crown Fibre Holdings (CFH) has allocated $NZ1.1 billion to be split between the two, with New Zealand Telecom to receive the lion’s share with $929 million and CCH to receive $180 million.

In a statement to the ASX, CFH chairman, Simon Allen, said both Chorus and Enable had the financial strength and ability to complete the rollout with the government’s allocated budget and timeframe.

“These are strong commercial agreements which met the Crown’s criteria,” Allen said.

Under the agreement Chorus will deploy fibre to 69.4 per cent of the UFB, with 30.6 per cent covered by Enable, WEL Networks and Northpower.

The telco will deploy and build the communal fibre infrastructure past premises by no later than 31 December 2019. Initial deployment will occur between 2012-2015 with a focus on “priority users” including businesses, schools and medical centres, as well as premises in the vicinity of priority users.

The infrastructure will pass approximately 830,000 premises, 50,000 of which by June 2012, and 100,000 each year until 2019.

The telco will also connect the premises to the service, which combined with the infrastructure build comes in at an average cost of between $2250 and $2750 per premise.

Following the agreement, Telecom NZ will move to structurally separate Chorus from the rest of the company, establishing it as its own listed company to ensure equal competition between broadband retailers.

“Under the terms of the agreement, Chorus will become a new listed company completely independent of Telecom (structural separation) and form the cornerstone of New Zealand’s fibre future,” Telecom chief executive, Paul Reynolds, said in a statement.

“We will be laying the first fibre for the Ultra Fast Broadband initiative from August this year, while continuing the process to demerge Chorus in parallel,” he said.

According to the telco, it would aim to complete the demerger by the end of 2011 after it revised it self-imposed separation timeline of June this year following its exclusion from first-round negotiations over its participation in the project.

The separation will result in Chorus’ establishment as a fixed line access network infrastructure operator offering services to retail service providers (RSP) on an open access basis.

Entry level wholesale pricing per month will start at $37.50 for a 30 Megabits per second (Mbps) plan, and $55 per month for a 100Mbps plan with retail service providers not being charged for standard residential connections.

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Tags: telecom new zealand, Ultra Fast Broadband (UFB), ASX:TEL, Telecom NZ
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