KEY POINTS:
Telecom is set to hand its technology partner Alcatel Lucent a contract worth in the region of $300 - $400 million to build a GSM mobile network in New Zealand.
That's the news we've been expecting for years and it comes courtesy of the Techsploder, Juha Saarinen. You can read the full details on Juha's blog, but the deal effectively puts a nail in the coffin of the CDMA (code division multiple access) technology, which Telecom's mobile network is currently based on.
Alcatel Lucent will construct a GSM (global system for mobile communication) network to deliver voice services to its customers while keeping its current CDMA network alive for high-speed data services and also for voice calling while it switches customers across to the new technology. Vodafone currently uses GSM technology for its 021 network.
For consumers, this change is a good thing.
A greater variety of mobile handsets are supported in the GSM world, so Telecom customers will in future enjoy a similar range of handsets to that of Vodafone customers.
Finally, Telecom users might get the Blackberry, the Motorola RAZRs, high-end Nokias, everything they've been denied in the past.It also means that Telecom's international roaming options will improve.
Telstra is also preparing to shut down its CDMA network in Australia where most Kiwis roam. With GSM on both sides of the Tasman, Telecom customers will still be able to use voice and services over there, once they get themselves a GSM phone. You'll be able to roam to Europe without having to borrow a GSM phone from Telecom.
The change-over will take a couple of years at least, but the future path has been set. In doing so, Telecom acknowledges that yet another of its investment decisions has been misguided.
It took a punt on CDMA mobile technology, which does a perfectly good job, but doesn't enjoy the same penetration around the world of GSM and therefore has struggled to gain traction.
Telecom's move sheds light on a couple of things.
It explains the appearance here last month of Alcatel Lucent's Asia Pacific boss Frederic Rose, whom I caught up with a month or so ago in Wellington. He was obviously here to seal the deal.It also explains TelstraClear's ditching of its $50 million plan to build a mobile network in Tauranga.
While the second-ranked telco blamed its decision to dismantle its "Unplugged" network on the last-minute collapse of a network roaming deal with Vodafone, it likely got wind of Telecom's plan and decided it would be futile to compete with two GSM heavyweights, Vodafone and Telecom.
On the flipside, maybe TelstraClear and the other players in the market now have a new player to negotiate a network sharing deal with.
The contract is good news for Alcatel Lucent which, while beating Ericsson and Chinese vendor ZTE to the deal, always had the strongest hope of success, given its extensive existing business with Telecom.
Telecom is now likely to leverage its ownership stake in Australian 3G operator Hutchison to buy GSM handsets, in the same way it partnered with US operator Sprint to buy CDMA handsets. Telecom will likely use the 850MHz mobile radio spectrum that was freed up with the decommissioning of its 025 network to run the new GSM voice service.
It's a big investment landing in the lap of Telecom's new CEO, but one the telco needed to bite the bullet and make a call on. That Telecom needed to change tack in mobile became painfully obvious to me when I attended the 3GSM conference in Barcelona earlier this year.
Technology change can be painful, but this one will give customers more choice in handsets, roaming options and mobile services.
What do you think of this change? Looking forward to the options available in the GSM world, you Telecom customers? Or has 027 treated you well?
