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BDFL - Memuneh
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  Reply # 40024 28-Jun-2006 22:33
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Jama: But the fact remains when you are walking the plank you either jump or wait to be pushed. Telecom have jumped.
Hope Telecom New Zealand have not Jumped the shark.






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  Reply # 40025 28-Jun-2006 22:39
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freitasm:
Jama: But the fact remains when you are walking the plank you either jump or wait to be pushed. Telecom have jumped.
Hope Telecom New Zealand have not Jumped the shark.




Well it looks like Telecom have indeed jumped the shark. It is definitely a tipping point where the existing business model has outgrown its 'original charm'.

I like the metaphor.




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  Reply # 40030 28-Jun-2006 23:21
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I 2nd the appreciative use of the metaphor... well done!

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  Reply # 40049 29-Jun-2006 08:54
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Jama: Juha - did I imply that it was a negative move? Not at all. But the fact remains when you are walking the plank you either jump or wait to be pushed. Telecom have jumped.


Well... "jumping the plank" is a negative move by definition. I don't think it's the right way to describe the situation.




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  Reply # 40051 29-Jun-2006 09:01
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Pushed over the edge then?

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Reply # 40058 29-Jun-2006 11:05
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juha:
Jama: Juha - did I imply that it was a negative move? Not at all. But the fact remains when you are walking the plank you either jump or wait to be pushed. Telecom have jumped.


Well... "jumping the plank" is a negative move by definition. I don't think it's the right way to describe the situation.


In the world of money, $3b wiped off the value of a public company because of a government decision would be considered to be negative by Standard and Poors, etc.

There will be pain before there is gain. Negative before positive.

If it was all good news the share price would have gone up not down.




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  Reply # 40061 29-Jun-2006 11:28
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What is considered good news for the consumer is never good news for the investor.

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  Reply # 40067 29-Jun-2006 11:42
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Jama: In the world of money, $3b wiped off the value of a public company because of a government decision would be considered to be negative by Standard and Poors, etc.


But that was a combination of three things:

  • The loss brought on by the massive AAPT write down which had nothing to do with the government;
  • Telecom forcing the government to introduce tougher regulation by being recalcitrant;
  • The leak of the cabinet documents - after announcing a loss, investors weren't very impressed by the storm cloud of a state services inquiry hanging over Telecom.
... and not because of Telecom announcing the voluntary separation.

Jama: There will be pain before there is gain. Negative before positive.

If it was all good news the share price would have gone up not down.


Look at the bigger picture. Telecom's Old Style Telco Business Model has been on life-support from the government for the past five or six years now.

It couldn't last. New Zealand can't afford to prop up Telecom's share price and share holder dividends anymore.

Before investors take heart, Telecom will actually have to do something. So far, there have only been words and no action. Same thing happened with BT.




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  Reply # 40071 29-Jun-2006 12:53
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juha, your smarter than that!

  • The loss brought on by the massive AAPT write down which had nothing to do with the government;

  • If that's true, why didn't the 3 bil fall off sooner?

  • Telecom forcing the government to introduce tougher regulation by being recalcitrant;

  • Huh? Telecom, a private company, going about it's business forced the government to regulate?? I see this in another light... the government changed, and changed the rules... essentially companies now have to operate as government wants them to operate, or they get regualted. Do you really think Cunliffe / Clark / Cullen are qualified to run a telco? Well that's what they're doing... badly in my opinion. Remember the government does what *it* wants, not what Telecom wants.

  • The leak of the cabinet documents - after announcing a loss, investors weren't very impressed by the storm cloud of a state services inquiry hanging over Telecom.

  • Leak or no leak, the government changed the rules on the shareholders of Telecom. If it had been Cullen's budget day sercet, the outcome would have been the same. The government changed the rules, and foriegn investors left. It's really that simple.

    "Look at the bigger picture. Telecom's Old Style Telco Business Model has been on life-support from the government for the past five or six years now.

    It couldn't last. New Zealand can't afford to prop up Telecom's share price and share holder dividends anymore.

    Before investors take heart, Telecom will actually have to do something. So far, there have only been words and no action. Same thing happened with BT."


    Telecom's old style business model is actually called capitalism. The governments new style doesn't really fit any political banner I have seen before.

    It's like socialism, as they tightly control the economy and the companies which operate in that economy, however socialism implies they provide services- something this government doesn't do very well at all. (there are a few dead kids about to back this up).

    Either way, the world has changed for now. And there will be more changes to come, but rushing into things is foolish.

    As for the shareholders that departed, I don't think they will return to NZ. Not until Cullen and Clark are a distant memory.

    Felix 5ive


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      Reply # 40075 29-Jun-2006 13:16
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    Felix, the reality was that Telecom enjoyed a long, long, long holiday with massive returns for the shareholders that few if any other telcos had. The state protected Telecom from competition and even subsidised its operations. That's not capitalism, but another "c" term that I'll leave you to look up. This isn't debatable - it really was official policy, a trade-off for Telecom agreeing to go along with social policies and investing here.

    Telecom screwed up that cosy relationship though, so now the reality is different. Blame the current management for gambling away all of that.

    As for AAPT, you know as well as I do that it's a $2 billion fiasco. The irony there of course is that AAPT didn't get anywhere because the Aussies were slow to introduce regulation that furthered competition...






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      Reply # 40078 29-Jun-2006 13:35
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    I'm learning here... so educate me

    1) how was Telecom protected? Exactly? Not, "the govt was nice to them..." but legislatively? Please don't use the TSO as an example as that was a sweetner to the public, from the governemt to smooth the way for the sale of a natioanl asset- nothing to do with social policy.


    2) how did the current management ruin this "cosy" relationship? give examples


    personally I agree AAPT wasn't a great investment. *but* the 3 bil taken off the value of Telecom had more to do with the nationalisation of the local loop, the way the government handled it, and the ineptitude of Peter Cunliff

    I'd also be interested to know if you think Fonterra should be forced to provide services to multinational agri firms, as an aside... 

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      Reply # 40083 29-Jun-2006 14:02
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    Felix: I'm learning here... so educate me


    Ha! You're just saying that.

    1) how was Telecom protected? Exactly? Not, "the govt was nice to them..." but legislatively? Please don't use the TSO as an example as that was a sweetner to the public, from the governemt to smooth the way for the sale of a natioanl asset- nothing to do with social policy.


    The KSO was the original sweetener, later on replaced by the TSO. That's actually not a bad example of legislation that ended up protecting Telecom under the guise of social policy.

    For another example, look into the latest set of regulation (which is scanned documents, sigh, over on http://www.beehive.govt.nz).

    It's spelt out in there, like the decision not to unbundle in 2003 and to have performance restrictions on the RUBS. The document summarises the telecommunications policy until now, why it failed and what is being done to change it.

    2) how did the current management ruin this "cosy" relationship? give examples


    As you're aware, the government expected something in return for not unbundling. A specified wholesale target (as set by Telecom)
    improved broadband uptake, investment, not to fight the regulation that Telecom agreed to in 2003 are some examples. Telecom decided to play hardball on those issues instead of going along with them - what was the government supposed to do? Say "oh well, no matter"?

    personally I agree AAPT wasn't a great investment.


    Errm, putting it mildly. I gather the actual value of AAPT is only $350 million thereabouts, which makes the $2 billion deal Deane and Gattung stitched up seem not entirely sound.

    *but* the 3 bil taken off the value of Telecom had more to do with the nationalisation of the local loop, the way the government handled it, and the ineptitude of Peter Cunliff


    David Cunliffe.

    Let's be clear one thing here: Telecom still owns the local loop. It has not been nationalised. Telecom won't be the monopoly provider of services over the local loop anymore, which brings it in line with overseas telcos.

    I don't know how to quantify how much of the paper value loss of Telecom shares can be attributed to the new regulation, how much to AAPT, etc, but it wasn't just the one thing. Investors realised that there's a new reality in store for Telecom, and some clearly didn't have faith in how the management would handle it - and bailed out.

    I'm critical of the way the government acted too, but because they waited so long. There was no reason for that, apart from the fact that 99.9% of pollies in the Beehive know nothing about technology. You want evidence of that? Check out some of the stupid reasoning behind the decisions in the 2001 Telecommunications Inquiry.

    I'd also be interested to know if you think Fonterra should be forced to provide services to multinational agri firms, as an aside...


    I don't know anything much about Fonterra, sorry. Is it relevant? What multinational agricultural companies operate here and what sort of services could Fonterra provide to them that would make the situation comparable to Telecom? It's not really on topic for the thread as far as I can tell.




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    Reply # 40084 29-Jun-2006 14:08
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    Last time I looked I couldn't buy Argentinean or Irish beef in the Supermarket and all the butter and milk are produced in NZ.

    In the UK a couple of years ago I could buy a leg of NZ lamb from Tescos for less than I pay here. You are right, off topic and food is no where near as important as broadband.




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      Reply # 40086 29-Jun-2006 14:13
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    Jama: Last time I looked I couldn't buy Argentinean or Irish beef in the Supermarket and all the butter and milk are produced in NZ.

    In the UK a couple of years ago I could buy a leg of NZ lamb from Tescos for less than I pay here. You are right, off topic and food is no where near as important as broadband.


    Well... it kind of drives my point home then :)

    I think you're right about the food prices actually. Milk and anything fresh costs a fortune here compared to Britain.




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    Reply # 40088 29-Jun-2006 14:30
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    juha:
    Jama: Last time I looked I couldn't buy Argentinean or Irish beef in the Supermarket and all the butter and milk are produced in NZ.

    In the UK a couple of years ago I could buy a leg of NZ lamb from Tescos for less than I pay here. You are right, off topic and food is no where near as important as broadband.


    Well... it kind of drives my point home then :)

    I think you're right about the food prices actually. Milk and anything fresh costs a fortune here compared to Britain.

    Exactly, yet the government focuses on broadband. Its much easier to meddle with broadband and Telecom than tackle the real issues facing New Zealand

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