Cheap deal, late launch for Econet

By PETER GRIFFIN telecoms writer

Fledgling mobile network operator Econet Wireless has delayed the launch of the country's third mobile-phone network to the end of next year and will resurrect equipment from a fallen Australian telco to do so.

Econet chief executive Tex Edwards said a commercial launch of a GSM mobile service for the last quarter of 2003 was now on the cards - a year later than originally planned.

That means Econet will enter the market with dated technology as competitors Vodafone and Telecom push towards third generation (3G) services with nearly 2.4 million customers between them.

But industry sources are reluctant to write off Econet's prospects just yet.

A senior telecoms executive told the Herald that Econet had moved quickly to pick up One.Tel equipment, including as many as 100 mobile base stations for less than $10 million - a fraction of the technology's original value.

The Lucent-branded mobile equipment will form the basis of Econet's network. The mobile hopeful will take advantage of cellsite co-location and mandatory roaming clauses in the Telecommunications Act to piggy-back on the networks of Telecom and Vodafone for nationwide access.

Sydney-based telecoms analyst Paul Budde said Econet's ability to pick up cheap equipment in the One. Tel fire sale may give it the base to chip away at the market strength of Telecom and Vodafone, through "sustainable price competition".

"However, this will be contingent on a faultless execution and on the hope that Telecom and Vodafone don't start price-dumping," he said.

Edwards would not confirm any deal to buy One. Tel assets. Econet had analysed the telco's demise and would avoid repeating its mistakes.

The delay in getting Econet off the ground had centred on gaining Resource Management Act consents to construct cell sites and searching for capital to pay for the network.

Econet is understood to have approached several local venture-capital groups but come away empty handed.

Overseas investment is being sought through the Zimbabwe-listed Econet group and Edwards said a breakthrough on funding was close.

Econet's only New Zealand investor is believed to be Hautaki Trust, which paid $4 million for a 30 per cent stake in Econet - most of which came from a $5 million Government grant. The deal involved Econet's being granted a 10-year option to use a block of 3G spectrum set aside for Maori.

Edwards was vague on what the impact on Hautaki would be if Econet failed to get off the ground, saying only that Hautaki had been realistic in its view of the "challenges for a new mobile phone operator".

Econet had a project team of 15 people and had hired a recruitment firm to assemble a full staff once capital raising had closed.

Edwards said Econet had already struck deals to establish cell sites - but not with Telecom or Vodafone. The other large infrastructure player, Broadcast Communications, is also out of the picture.