Telecom New Zealand (Telecom) has announced plans to create an "independent wholesale operation" in a bid to promote telecoms competition.

Today's confirmation that Telecom plans to separate its wholesale and retail operations follows growing speculation about the future of the Kiwi incumbent after the government raised concerns about its market dominance and the lack of broadband competition.

If successful, rival operators should be able to get equal access to Telecom's wholesale network, giving them greater scope to compete and invest in broadband services.

"The country expects world-class broadband services, and our decision to reorganise our business is one more step towards ensuring healthy competition exists to provide that," incoming Telecom chairman Wayne Boyd said.

"We have looked at a number of arrangements in place or under consideration around the world, including BT in Britain and Telstra in Australia. We now intend to initiate the best form of separation to suit New Zealand's conditions."

Among the proposals outlined today is the idea of creating a level playing field for all retail operators - including Telecom - with the whole separation overseen by an independent monitoring group.

Further details of Telecom's plans are due to be published early in August.

In May it emerged that the Kiwi government was planning to drive through a series of measures to force Telecom to unbundle the local loop and increase competition.

A raft of proposals - including LLU, increased regulation, and the promotion of investment by rival operators in fibre, wireless and satellite networks - were put forward as a way to drag New Zealand out of the bottom third of the OECD's league table of broadband countries.

Execs from Telecom visited BT and Ofcom to see what measures have been undertaken in the UK to improve competition. At the time industry onlookers said the visit showed that Telecom was considering the idea of splitting its wholesale and retail businesses to head off criticism from its own government. ®