NZ Telecom says to limit infrastructure investment

WELLINGTON, April 27 (Reuters) - Telecom Corp. (TEL.NZ), New Zealand's largest listed company, said on Friday it would limit infrastructure investment, a move that could leave a shortfall of some NZ$1 billion ($740 million) in funding for high-speed broadband services.

Telecom said the government's proposal to split it into three separate operating units gave it little incentive to invest in its network, which it is being forced to open up to rivals.

"The government's proposal is fundamentally unworkable and ignores the fact significant new investment is required in order to meet stated policy objectives," Chairman Wayne Boyd said in a statement.

The government wants Telecom, the country's dominant telecommunications provider and a former state-owned monopoly, to be split into wholesale, retail and network operations.

Telecom said under that scenario, it would only invest $NZ500 million of the NZ$1.5 billion it said the government needed for its goal of high speed Internet to 90 percent of the population by 2010.

"Investment requires certainty and confidence and no company can invest if the returns are too low and the risks too high," Boyd said.

He said Telecom's alternative, formally submitted to the government on Friday, was to put Telecom's network assets as a separate company.

Boyd said an independent company with a steady rate of return would be better placed to invest in the national phone network.

Telecom first floated the idea on April 13, saying it was open to the idea of the network company being owned by the government or private investors.

Although Telecom's nationwide copper phone line network has a book value of NZ$2 billion, analysts expect it sell for less, because of the investment required to provide high speed Internet services.

Telecom Chief Financial Officer Marko Bogoievski told Reuters on April 13 that Telecom would only sell if its network was valued on commercial terms.

He also said the cost of complying with government proposals would be around NZ$330 million, with ongoing costs of about NZ$40 million a year. The estimates are more than double those made by the company at a briefing last month.

Shares in Telecom, whose rivals are local units of Australia's Telstra Corp. (TLS.AX) and Britain's Vodafone Plc. (VOD.L), last traded down two cents to NZ$4.78.

(NZ$1=$1.35)

((Reporting by Adrian Bathgate, editing by Jonathan Standing; Reuters Messaging: adrian.bathgate.reuters.com@reuters.net; +64-4-471-4233)) Keywords: TELECOM INVESTMENT/

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