Telecom to spend $300m on new mobile network

By NZPA

Friday 8th June 2007

Telecom is to spend $300 million on a new mobile network which it will run alongside its existing network.

Announcing the move today, the company gave a guarantee that current mobile phones would continue to be supported on its existing CDMA (code division multiple access) network for at least the next five years.

Chief operating officer for business Simon Moutter said the development would also have little impact on operating expenses.

Work on the new wideband CDMA (WCDMA) network was due to start late this year, with commercial terms for it now being finalised with company Alcatel-Lucent.

Moutter said the $300m in capital expenditure would be spent during the next two years.

It was about $200m more than would have been spent if Telecom had stuck to the CDMA path only, with much of the infrastructure being shared between the two networks.

Today's announcement followed two to three years of investigations, and the wait had been worthwhile, Moutter said.

"We have competed strongly in mobile in that intervening period, and done particularly well in the market.

"And during that time the price of building this network has reduced by at least 50 percent over the numbers we talked about two or three years ago," he said.

"We also have a way to deliver it that is closely integrated with our existing CDMA network infrastructure, and we end up in a commercial arrangement that has very little impact on our operating expenses.

"So we can run these networks together without a large cost bubble. That gives us a genuine choice to continue to operate these networks in parallel and offer the market the best of both technologies for many years," Moutter said.

Telecom defended its decision to initially choose a CDMA network, which is now less internationally widespread than the GSM network used by rival Vodafone.

CDMA coverage is patchy in Europe and in Australia Telstra is closing down its network using the standard.

As a result Telecom has had to take other steps to ensure it is able to offer its customers global roaming capabilities.

That includes the launch this month of WorldMode, which Telecom said would allow voice roaming on both CDMA and GSM (global system for mobile communication) networks in 180 countries.

The WCDMA network Telecom is now to build was developed as a replacement for second generation GSM.

Kevin Kenrick, Telecom's chief operating officer for consumer business, said the company had no reservations or concerns about its commitment to CDMA.

"The fact we've actually grown market share for 10 of the past 11 quarters would vindicate that," he said.

But Moutter also said the building of a WCDMA network would solve challenges Telecom had faced for many years regarding access to devices at competitive prices in the smaller CDMA world.

WCDMA would provide users with a broad device selection, real global roaming capability and true broadband speeds, he said.

The investment would enable Telecom to map out a mobile technology path in an environment characterised by rapid technology change, massive increase in customer demand, and desire for the concept of mobility to extend to anywhere in the world.

It supported a strong global roaming proposition in tandem with the WorldMode launch, Moutter said.

"It clearly solves permanently the problem we currently face with the impending loss of CDMA network capability in Australia."

Despite that, Telecom had ambitious plans for growth in the mobile market using the existing CDMA technology platform.

"We're not ditching our existing CDMA network, or the devices or services that run on it," he said.

"We are willing to guarantee our customers that their current mobile phones will continue to be supported by Telecom's network for at least the next five years.

"In my view the network will far outlast the devices that are in the market today."

Telecom shares were down 10c, or 2.1%, to $4.62 at mid-afternoon today , while the NZSX-50 index was off 1.4%.

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