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Telecom NZ savings damage prospects

By Darren Greenwood, ZDNet.com.au on February 9th, 2010

Techie Isles

Darren Greenwood

Darren Greenwood keeps his feet on New Zealand's shaky ground and his head up in the long white cloud.

Topics

telecom nz, broadband network

If Telecom NZ wants to have any of the NZ$1.5 billion the government intends to spend on its new broadband network, it had better think long and hard before offshoring 1500 jobs.

Telecom's brand has been extensively damaged by the recent outages with its new XT network. Even its legacy CDMA system failed. In my opinion, this stems from the company following that time-honoured Kiwi tradition of doing things on the cheap, and finding it backfires in the process.

Already, analysts blame the Alcatel-Lucent kit for the troubles faced with XT, although the truth will only come out when Telecom produces its official report.

Cost cutting in the form of offshoring for placing directory inquiries and other services abroad have also damaged the Telecom brand as service standards slump, with foreign telephone operators not always understanding Kiwi English and place names, never mind Maori.

Outsourcing engineering work, another Telecom example of doing things on the cheap, also created problems, and after living in provincial Northland, I can vouch for some unreliable landline services.

New Zealand's ICT minister, Steven Joyce, is reluctant to intervene in the affairs of a private company, and the Crown Fibre Holdings company set up to manage the government's $1.5 billion broadband investment is meant to be independent.

However, a populist and sometimes poll-driven government may not want to reward a major entity looking to dump up to 1500 highly skilled technicians at a time of high and rising unemployment. Even if it did, it might not think dumping all these people will leave Telecom with the capability to carry out broadband tenders.

Labour's ICT spokesperson Clare Curran still regards the former state-owned telco as government property, the staff of which possess essential skills for the nation.

While the days of politicians running telcos may be over, at least in New Zealand, Telecom remains an iconic Kiwi company. Plus Curran's economic nationalism, as shown by an online Fairfax poll, is once more in tune with public opinion than appears the hands off approach of Steven Joyce.

Telecom needs to look at how earlier attempts at cost-cutting may have actually cost it money rather than saved it. It needs to see how further offshoring and outsourcing will be fraught with problems, risking further loss of custom, not just from government. Existing false economies have cost the company and its customers more than enough already.

Talkback

savings damage prospects

this might be the writers opinion, however if it was true the telco wouldnt be making record income, in the worst trading environment in its history. Telstra is in the same boat, unprecendented amounts of free cash, building a war chest. unless the monopoly effect is totally dismantled ( which it wont - no one globally has done so) get used to the fact that shareholders want returns, irrespective of the climate, the service they provide etc. there is no reason offshoring should make a blind bit of difference, just get the quality right

AnonymousAnonymous February 9th, 2010
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