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Companies and Markets
People in $50m deal with Telstra
Tony Boyd
465 words
6 December 2005
Australian Financial Review
First
16
English
© 2005 Copyright John Fairfax Holdings Limited. www.afr.com Not available for re-distribution.

People Telecom has moved to lift some of the gloom overhanging the second and third-tier companies in the telecommunications sector by buying more than $50 million in fixed-wire and internet services from Telstra's wholesale division.

Chief executive Ryan O'Hare said the deal between People Telecom and Telstra showed there was a mutually beneficial relationship between Telstra and its resellers.

"If you read the paper as a layman, you would think that anyone who is a competitor of Telstra is going to get screwed," he said. "Sol (Telstra chief executive Sol Trujillo) has said he is going to make his customers and his shareholders his number one priorities. I think that's great but it is not necessarily bad for all of Telstra's wholesale customers."

Mr O'Hare said it was understandable that Telstra was unhappy about helping its competitors with large network assets, such as Optus, AAPT and Primus, to extend their reach by buying access to Telstra's network. "When you analyse it, there is only one company that buys all of its fixed-line services from Telstra - that's us," he said.

Mr O'Hare said People Telecom had been a customer of Telstra wholesale for five years and was buying about $6 million of services from Telstra each month.

He said the latest agreement, which started on December 1, involved the provision of fixed-wire voice services and broadband ADSL services.

Mr O'Hare refused to reveal the details of the agreement but said the deal would involve the purchase of about $50 million in services by the end of this financial year.

Deena Shiff, group managing director, Telstra wholesale, said: "Telstra enjoys a great relationship with People Telecom, and this agreement demonstrates our long-term commitment to the delivery of quality services in the wholesale market."

Mr O'Hare said the third-tier telecommunications sector in Australia had been hit by uncertainty following Mr Trujillo's appointment as chief executive of Telstra.

That uncertainty has seen shares in several telecommunications companies come under selling pressure on the Australian Stock Exchange.

Shares in the country's third largest internet service provider, iiNet, have fallen more than 35 per cent to $1.80 while shares in Commander Communications have fallen 20 per cent to $1.94.

Telstra's tougher stance against resellers of its wholesale services has been cited as one of the reasons Telecom New Zealand is considering offers for its Australian arm, AAPT.

AAPT, which buys about $500 million in wholesale services from Telstra each year, is in the Telecom NZ books at $1.1 billion but analysts believe it is probably worth less than $450 million.