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Wireless internet broadband modem - Source: ONE News -
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Telecom says it is set to lose up to $56 million a year when the government's rural broadband roll out goes ahead.
Communications and Information Technology Minister Steven Joyce announced on Tuesday the broadband proposals have been signed off by the government and work is expected to get underway from early next year.
He says under the plan, 97% of rural households would get access to broadband services of at least 5Mbps, and the remainder would have speeds of at least 1Mbps.
"For many remote and not-so-remote rural areas this will be light years ahead of where they are today," he says.
The government has also finalised plans involving reform of the Telecommunications Service Obligations (TSO), involving compensation to Telecom for supplying local telephone services in commercially non-viable areas.
Telecom says as a result its EBITDA guidance for each of the 2011, 2012 and 2013 financial years will be adversely impacted by up to $56 million.
Rob Groenendal from Craigs Investment Partners says it is a real blow for Telecom, but not surprising.
"It has been a long time coming and these events have really been signalled for some time, so it shouldn't come as a shock to Telecom or anyone else. But they will certainly be facing headwinds," he says.
Groenendal says the plan is a real positive for the country.
"I think in this day and age high-speed broadband should be a given for a country like us."
Telecom shares were down 1 cent to $2.20 in late morning trading
on Tuesday.
