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New Zealand Declines Telecom's Separation Plan

The New Zealand government on Friday turned down an amended separation plan proposed by Telecom Corp, saying the company would have to do more to implement rulings to boost competition.

The government ordered the dominant telco in 2006 to open its phone network to competitors and split into wholesale, retail and network divisions to speed up the introduction of cheap, fast internet services and greater competition in telecommunications.

In October, Telecom announced a NZ$1.4 billion (US$1.1 billion) plan to split into three, but Communications Minister David Cunliffe said Telecom's undertakings would not be enough.

"In general terms, Telecom's revised undertakings come close to meeting my Amending Determination. However, there are a few areas where clarification of the undertakings is still required," Cunliffe said in a statement.

He said Telecom needed to provide a clear upper limit on group-based incentives to ensure its wholesale business would treat all its customers equally. It also needed to clarify some technical issues.

Telecom must open up its copper wire domestic phone networks, known as local loop unbundling, to competitors to provide competing internet and phone services.

Cunliffe said Telecom must provide a revised plan by March 25.

Telecom has said it would upgrade and extend its fixed network with faster internet capability to any towns with 500 or more phone lines.

It said would have a separate network unit set up by March 31, and most other operational changes in place by July 1.

Shares in Telecom, New Zealand's largest listed company, were up 0.3 percent at NZ$3.92 in early Friday trade, after trading between NZ$3.85 and NZ$4.98 over the past 12 months.

Telecom dominates New Zealand's fixed line sector but faces limited competition from TelstraClear, while it just trails the local unit of Vodafone in the mobile market.