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Kiwi telcos hungry for consolidation

Driven by fear of ultrafast broadband initiative

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Internet Security Threat Report 2014

A desperate need for consolidation in the New Zealand market is being driven by the government’s national broadband network initiatives and could see accelerated exits and/or acquisitions according to analysts Ovum.

Commenting on the speculation over takeover talks between Vodafone New Zealand and TelstraClear, Ovum’s David Kennedy told The Register “There really is a need for consolidation and the Ultra Fast Broadband initiative (UFB) will help to drive that. Migrating customers to fibre will not be easily done by small companies.”

TelstraClear recently confirmed market speculation that it was approached by, and is in discussions with, Vodafone New Zealand to explore the potential sale of TelstraClear to Vodafone New Zealand.

“Discussions are continuing and there is no certainty as to whether an agreement will be reached,” the statement said. Kennedy said that that the traditional fixed line dominance of Telecom New Zealand and mobile leadership of Vodafone had created a very fragmented market.

“It does not make a lot of sense for Vodafone or TelstraClear to be dominated by mobile or fixed,” he said.

He added that there is real indication that those talks would lead to anything substantial but suggested that it may be just as likely that Telstra would be looking at acquiring the Vodafone New Zealand asset .

“Telstra does have a significant war chest, while Vodafone doesn’t and that group is feeling financial pressure in Europe so large sums of cash are not easy to find,” he said.

While the Vodafone NZ network is worth a lot more than the Telstra Clear, and would be valued in excess of $1 billion, Telstra has a potential war chest of AUD$22 billion based on forecast NBN compensation.

Telstra Clear needs scale to improve profitability but there would be arguments that an acquisition the size of Vodafone NZ network may be better served in emerging markets such as China or elsewhere in Asia, he said.

The move comes at a time where Vodafone NZ hasd decided to shed its controversial IT offshoring efforts and according to local press is on a recruitment drive to fill 100 IT department vacancies. Vodafone Australia did not answer queries in regard to whether it was following the trend.

Vodafone NZ has also released an RFP for a lone technology partner to streamline its infrastructure support and maintenance needs.®

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