Reports from New Zealand suggest that Franco-US vendor Alcatel Lucent (ALU) is to award a compensation payment of NZ$100m (US$72.8m) to incumbent player Telecom over the poor performance of the ‘XT’ 3G network it delivered to the carrier, and operates on its behalf. ALU CEO Ben Verwaayen has been visiting New Zealand over the last week and the deal was understood to have been struck during his meetings with Telecom

In February this year Telecom’s CTO Frank Mount and Alcatel Lucent’s head of New Zealand Stevel Lowe both resigned over the network’s well publicised shortcomings, which have included several outages.

A report commissioned by Telecom from Analysys Mason argued that the network and support systems were not robust enough to deal with demand from Telecom customers migrating from the firm’s CDMA network. The Radio Network Controller was the weakest link in the chain, Analysys Mason reported.

Crucially, however, traffic levels were within Telecom forecast ranges, suggesting that the network ought to have been capable of handling them. Analysys Mason recommended that customer acquisition activities be slowed as the firms work to improve the network’s performance. It also said that ALU and Telecom had already made improvements to the network.

“The review has been both chastening and heartening at the same time,” said Paul Reynolds, CEO, Telecom New Zealand.  “Clearly some serious errors were made but the report shows that XT is fundamentally sound, that Telecom, and our partner Alcatel Lucent are now on the right track. Significant progress in improving the robustness and reliability of XT has been made.”