Newcomer could bring cheap mobile calls

Econet's entrance into the mobile phone market could be a "price buster", Australian-based telecommunications analyst Paul Budde says.

Budde, who held conferences on the future of New Zealand's telecommunications industry over the past few days in Wellington and Auckland, said that if the Zimbabwe-based company was to succeed here it would need to significantly undercut prices from rivals Telecom and Vodafone.

Econet, which on Friday announced plans to build a third-generation network in Auckland next year, would need to offer services about 50 per cent cheaper.

"A price cut of 15 to 20 per cent would be instantly matched by Telecom and Vodafone," Budde said. "A big cut is the only way to quickly get market share."

New Zealand's mobile market is considered to be near saturation point, with about 3.6 million subscribers. The country has 3.2 million adults.

It also has some of the most expensive cellphone costs in the Organisation for Economic Co-operation and Development.

On Friday, Econet announced a plan to build 410 transmitting sites in four cities with Chinese telecommunications supplier Huawei, which would provide the network and handsets.

Construction is expected to start by April.

Budde said that Econet, which runs networks in several African countries, and the Chinese company had experience in offering low-cost calling.

A Goldman Sachs JBWere report also said Econet has a "realistic prospect" of developing a network, and that it could add new competitive pressure to Telecom.

Econet still faces regulatory hurdles and would need to negotiate a roaming agreement with an existing carrier in order for its customers to be able to move outside its planned coverage areas.

It plans to use the Wideband Code Division Multiple Access (W-CDMA) mobile standard, which means its technology would be compatible with Vodafone's network.

The prospect of enticing a large Chinese company to invest in New Zealand could also force the Government's regulatory hand in several key areas, said an analyst who asked not to be named.

Econet is seeking firm rules on roaming, as well as on putting equipment on rivals' broadcasting towers.

According to the Goldman report, "ultimately the network investment is likely to come down to a Government decision as to whether or not to alter the current regulatory environment".


Getting mobile
* A 10-site Econet pilot is expected by April; roll out of network to four cities starting late 2006.
* Will use W-CDMA technology from Chinese firm Huawei.
* Econet NZ is 30 per cent owned by Maori spectrum trust Hautaki, rest by Zimbabwe-based parent.
* Regulatory change still needed for venture to succeed.
* Call charges could be 50 per cent below Telecom and Vodafone.