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Tuesday, March 8, 2011

Christchurch earthquake could cost Telecom 'several million dollars'

Christchurch earthquake could cost Telecom 'several million dollars'

Last updated 05:00 07/03/2011
Telecom has forecast that the Christchurch earthquake could directly knock several million dollars off its profits.

"A portion of Telecom's quake-related expenses in Canterbury will be covered by our business insurance. Much of our expenditure, however, will not be covered," spokesman Mark Watts said.

"You should assume this latter component will amount to several million dollars."

The company booked a $4m charge in its accounts from the September earthquake in its interim results last month.

Craigs Investment Partners financial analyst Geoff Zame guessed the charge for the second earthquake could be three or four times higher.

Telecom network arm Chorus said the earthquake had affected some large underground cables, particularly in the eastern suburbs. But spokeswoman Melanie Marshall said it couldn't assess the extent or cost of damage to its network in the CBD because of general conditions there.

Forsyth Barr analyst Guy Hallwright said he believed Telecom's underground cables could not be insured. "Your best guess would be it is not going to be less than last time."

First NZ Capital analyst Greg Main also expected a larger short-term impact from the second earthquake. He said the obvious thing to do would be to rebuild Christchurch as a "very modern city with high-speed broadband everywhere" and plan for the ducting in the rebuild.

"You have got two universities down there. You have got relatively flat campus-style living. There is no reason why you couldn't have a Microsoft campus and try and really `sell' it as a modern telecommunications city."

It might be logical for Telecom to partner with the council, which owns rival UFB bidder Enable Networks, to do that quickly, he said. "The council has been quite `on to it' commercially" but had commitments to other investments, such as to Lyttelton Port.

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