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INTERVIEW:NZ Telecom: 3G Ops To Put Pressure On Vodafone
By Shri Navaratnam
Monday November 29, 4:06 AM
Of DOW JONES NEWSWIRES

http://sg.biz.yahoo.com/041129/15/3ovwe.html

WELLINGTON (Dow Jones)--Telecom Corp. (TEL.NZ) said it expects its recently launched third-generation mobile phone operations to put pressure on New Zealand's No. 1 operator, Vodafone Group PLC (VOD.LN).

"With the 3G launch, the feedback so far has been pretty positive, and we've hit our initial targets quite easily from our retail outlets and direct sales stores," said Telecom Chief Financial Officer Marko Bogoievski.

"I think for a short period of time it will put pressure on Vodafone," he said, noting that the U.K. company has already launched special, discounted offers to business customers.

Vodafone, the world's largest mobile services provider, has said it won't launch its own domestic 3G service until the middle of next year. It has already begun building its W-CDMA 3G mobile network in New Zealand and Australia after selecting Nokia Corp. (NOK) for the project in May.

Bogoievski said Telecom's initial NZ$40 million investment in Evolution Data Optimized, or EV-DO, technology will be "very competitive" with Vodafone's W-CDMA network.

He rejected some commentators' assertion that Vodafone's W-CDMA technology will have handset advantage over Telecom, saying no one knows which 3G technology will set the benchmark for global standards in the long-term.

Analysts have said the W-CDMA technology may have handset advantage because more global players are currently on that platform. However, they note that EV-DO is also fast catching up and would be able to close the gap with big players such as Sprint backing that technology.

"That would be an issue in the long term, which no one really knows about as you are trying to make judgments on which is going to end up being a global standards," he said.

Telecom would be prepared to switch technologies, however, if dynamics in the 3G market warranted such a move, he added. "We think it's prudent to keep a close watch on other technologies and make sure our customers are sort of made future-proof."

Sprint Partnership To Help

In the short- to medium-term, Bogoievski said Telecom is confident of putting up effective competition to Vodafone when the U.K. giant launches its own 3G services next year.

He said Telecom is beginning to reap benefits from its partnership with U.S. carrier Sprint, which announced its own plans to for a phased national network rollout of EV-DO in the U.S. in July this year.

Bogoievski said the partnership will enable Telecom to introduce Push-to-Talk phones next month and video messaging around Christmas.

"We are also putting in place an investment proposal for video streaming," he said, without elaborating.

"There's quite a lot of uptake in devices such as 3G data cards, in fact we've run out of stock and are working to quickly replace them," he said.

Commenting on the market share losses to Vodafone, Bogoievski said most of the erosion had occurred in the low-margin prepaid customer base - a consequence of Telecom migrating customers from its analog network to its digital 1XRT and CDMA networks.

"In fact, in the business market we've done more than hold our share, we are pretty happy with the position there," he said.

Vodafone said recently it has increased its share of the local mobile market to 56.3% from 55.4% in July this year.

However, Vodafone's success appears to have come at a slight cost with average revenue per customer in the 12 months to September decreasing marginally by 0.7% on year to NZ$661 a year, or around NZ$55 a month. The erosion in ARPU was due to a fall in the postpaid base, where Telecom has managed to make some ground.