Telecom NZ agrees to $24m settlement

Incumbent rushes record settlement ahead of shareholder vote.

New Zealand incumbent Telecom NZ has agreed to pay rivals $NZ31.6 million ($A24.65 million) for failing to provide equivalent voice services as its retail arm.

The settlement would provide payments to competing telcos Vodafone, Orcon, Callplus, Compass Communications and Airnet.

The payments are expected to return the "significant commercial gain" Telecom gained from allegedly breaching regulations requiring it separation operationally into separate wholesale and retail arms.

A spokesperson for the commission said the settlement was the largest of its kind under the current telecommunications regime.

Telecom agreed to settle after communications regulator, the Commerce Commission, issued legal proceedings against the incumbent in May this year.

It shadows the previous largest settlement, in which Telecom NZ paid out $NZ1.6 million ($A1.24 million) in a 2010 case involving incentives to its wholesale customers.

Though large, the telco had escaped more expensive claims of $NZ65 and $74 million each to Callplus and Kordia, respectively. The commission may have sought similar penalties of up to $10 million per breach, had the case gone to court.

Telecom NZ conceded it had "failed to meet expectations" in providing an unbundled broadband service to competitors with exchange-based voice services.

However, the telco denied it had breached any legally binding operational separation undertakings struck in 2006, under the previous federal government.

As part of the undertakings, Telecom agreed to embark on a roadside cabinet programme, to shorten copper line lengths for increased broadband performance. It would also be required to provide equal access to its wholesale products as its retail arm.

According to the commission, Telecom NZ's refusal to provide telcos with the voice service caused serious harm to competition and reduced the extent to which rivals could offer local loop unbundling.

A spokesperson for the telco said the company wished to settle before its structural separation, required to take place this year in order to progress with the government's Ultra-Fast Broadband fibre-to-the-premises initiative.

Shareholder approval of Telecom's proposed structural separation - agreed to as part of its UFB bid - would revoke the previous operational separation undertakings.