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TelstraClear says network no bluff

By Rob Hosking

Friday 20th June 2003

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TelstraClear yesterday rejected suggestions its talk of building a third mobile network in New Zealand is all a gigantic bluff.

Telstra Group chief executive Ziggy Switkowski last month suggested the company may seek to build a mobile network to compete with the existing networks owned by Telecom and Vodafone.

Telecommunications analyst Paul Budde this week suggested the talk was just a ploy.

"This announcement ... must be more bluff than anything else," Mr Budde said.

"There is just no room for a third player in a market the size of Melbourne."

TelstraClear spokesman Matthew Bolland denied the company was bluffing.

"We have issued a request for information and we are talking to all the players," he said. "We need a full-service mobile business and we are going to achieve that in some way."

TelstraClear has been in talks with Vodafone for nearly a year on ways to extend the existing relationship between the two firms.

At present TelstraClear acts as little more than a reseller of Vodafone, with a few add-ons. Advances in technology mean it is keen to integrate the two networks to provide a more seamless interaction between voice, mobile and data.

In Australia Vodafone has signalled it does not want to go to the cost of extending its third-generation mobile network outside the main urban areas. Instead, it is in talks with Telstra to use the larger carrier's existing cell sites.

The two would do a deal, Mr Budde suggested.

He said the economics of a third New Zealand network seemed prohibitive. The mobile market in New Zealand was now mature, unlike when Vodafone bought out BellSouth in 1998.

Telecom and Vodafone were now so competitive that margins were small.

And the time taken to install a new network ­ along with all the resource consent hearings for cell sites, with their accompanying bad publicity ­ meant installing a third network was likely to be a drawn-out process.

Vodafone bought BellSouth's network and business in 1998 for $750 million. Expenditure has since pushed the value of its investment well past $1 billion.

Vendors have been asked to tell TelstraClear what they think is possible.

"That could range from building a network, leasing, or some other combination," Mr Bolland said.

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