No easy road for Telecom Mobile

By Duncan Bridgeman

Friday 6th December 2002

Telecom is barking up the wrong tree with its investment in Hutchison 3G and its mobile unit in tatters, telecommunications analyst Paul Budde said yesterday.

In Auckland to release a report on the telecommunications market in this country, he slammed Telecom's mobile strategy as being out of sync with the rest of the world.

"Telecom have been all over the place. They stayed in analogue too long, then they made a decision to go to CDMA and now they are trying something with mobile data, which is not really a goer either."

Mr Budde said Telecom's $A400 ($449) investment in Hutchison 3G, which planned to launch a high-speed data service on a CDMA platform early next year, was a mistake.

"The economics are in GSM and not in CDMA, so slowly Telecom will fold."

He pointed out the world's biggest cell phone maker Qualcomm last week said CDMA outside the US and Korea was already dead and the company would no longer pursue that as a global standard.

The GSM technology, endorsed by Telecom's main rival Vodafone, worked better with the youth market, with sexier and cheaper phones, he said.

Vodafone and Telecom Mobile had recently switched strategies to increase market growth by ditching handset subsidies to target the more lucrative business sector.

But Vodafone had eaten into Telecom's market lead and was now carrying more than 50% of mobile traffic and had a monopoly of the youth market, he said.

Mr Budde stopped short of advising Telecom to cut off its mobile division and instead concentrate on its core fixed-line business and broadband initiatives.

"They have to maintain a mobile presence but even if they capture an equal share of the older generation and business market, over time Vodafone will still win."

Mr Budde's comments smudged an even bleaker picture for Telecom's other Australian business, AAPT, which he said had little chance of success.

Telecom should cut its losses and sell AAPT, which had already been downsized in value this year, he said.

"It was over-valued from day one and I would suggest get out, sell it and concentrate on their home market.

"AAPT is going backwards rather than forwards so Telecom's whole growth strategy in Australia is in tatters."

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