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Telecom demerger one step closer as asset allocation plan approved

The government today approved Telecom’s plan for dividing its assets after its planned structural separation – the first major step in the company’s proposed demerger process.

Telecom’s Asset Allocation Plan, released last month, identifies how its assets and liabilities will be split. It is required to divide itself into two separate companies (New Telecom and Chorus) in order to be involved in the government's ultra-fast broadband project.

Minister for Communications and Information Technology Steven Joyce said the approval kick-starts the most significant telecommunications industry change in the past 20 years.  

“Should Telecom’s shareholders vote in favour of the demerger, Telecom will be the first telecommunications company of its size to undergo voluntary structural separation.”

Under structural separation, the new Chorus will be the main provider of fixed-line telecommunications infrastructure while the new Telecom will provide retail services.

Certain assets will be used by both companies, including key infrastructure such as fibre-optic cables, network routers, power systems, land, buildings and furniture.

New Chorus has been allocated the passive copper network; local access fibre and electronics; and business and operating support systems for wholesale customers, while New Telecom will own VoIP hardware and software; the mobile network; overseas assets including AAPT and the 50 percent stake in the Southern Cross Cable; and its sales and distribution channels, among others.

Joyce said he consulted with the Telecommunications Commissioner, who agreed the plan met the requirements of the Telecommunications Act.

The Commerce Commission will monitor and enforce the sharing arrangements outlined in the plan, ensuring they are unlikely to harm competition, and will protect confidential customer and commercial information.

Telecom is aiming to finalise the demerger this year, subject to a shareholder vote.

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