KEY POINTS:
TelstraClear has hooked up with Telecom to provide mobile services but the deal only provides access to Telecom's CDMA network, which is to be phased out in five years.
Telecom's acting chief executive, Simon Moutter, confirmed that the agreement to provide TelstraClear with nationwide mobile coverage would use its present CDMA network.
Telecom announced plans in June to replace that platform with a new $300 million mobile network using GSM technology - similar to that used by Vodafone - to handle mobile calling, video and high-speed broadband.
Moutter said TelstraClear and Telecom had not discussed a deal to use the GSM technology.
"There are still many things to clarify about that network - its costs and its capabilities.
"Clearly, success on this new arrangement would be a good platform for a conversation to occur around their ability to share our [new] network, but that's not covered by this arrangement."
Work on the network, which will operate in tandem with Telecom's existing mobile network for at least five years, would begin before the end of the year.
It is expected to go live in late 2008.
TelstraClear head of wholesale Raymond O'Brien said he could not disclose confidential details but understood TelstraClear would have access to Telecom's networks as they developed.
"Obviously as they move to different technologies we'll be moving with them."
The deal announced yesterday allows TelstraClear to set its own pricing and packages for mobile services using Telecom's network, promising TelstraClear more flexibility than its reselling arrangement with Vodafone which expired at the end of June.
"It's really just a deal where they would pay a certain amount for usage and they can do whatever they like," said Moutter.
He said the Telecom deal gave TelstraClear a strong share of the margins which would give them superior returns if they hit decent volumes of business.
"We've constructed an arrangement for TelstraClear which will give them some strong financial incentives to strive to grow their mobile base."
Moutter said Telecom would benefit from reducing the costs of running the network by having more people paying to use it.
Forsyth Barr analyst Guy Hall-wright said reselling and wholesale deals were common in the Australian market but resellers tended to make very little money with most of the income flowing back to the network owner.
"The general thinking is that resellers help you by adding another sales outlet."
Hallwright said with Telecom adding 40,000 to 50,000 customers a quarter to its network, signing TelstraClear would have only a marginal impact on Telecom's mobile market share.
IDC analyst Darian Bird was surprised to see Telecom giving its most direct competitor in the fixed-line business access to a piece of thepuzzle TelstraClear had always been missing.
"It may want to appease the regulator, or perhaps it doesn't view TelstraClear as such a big threat."
At the beginning of the month, Telecommunications Commissioner Ross Patterson announced plans to regulate the mobile market to encourage the entry of a third mobile network operator.
Telecommunications Users Association head Ernie Newman said that on the face of it the deal looked good in terms of giving users more choice.
"But I am disturbed at the short-term nature of it and the fact that it doesn't appear to automatically give the customer the benefit of Telecom's progressive upgrades. I would have hoped there would have been something rather more future-proofed than this appears to be."
Last week TelstraClear, New Zealand's second-largest phone and internet company, reported a $28 million loss - significantly down on last year's $10 million profit before interest and tax.
Telecom shares closed down 7c yesterday at $4.28.
TELSTRACLEAR GOES MOBILE
* TelstraClear has signed a deal to use Telecom's network to launch a mobile phone service this year.
* For seven years TelstraClear had offered mobile services via an agency agreement with Vodafone.
* Under the agency deal, which ended on June 30, TelstraClear resold Vodafone mobile phones and packages.
* Telecom had 1.98 million customers at June 2007 against Vodafone's 2.27 million.
