KEY POINTS:
The prospects for a third mobile phone network in New Zealand took a hit yesterday as TelstraClear pulled the plug on its new $50 million high-speed Tauranga network.
The Australian-owned telco says the project - known as "Unplugged" - has been rendered uncompetitive after rival Vodafone made a last-minute change to the two companies' "roaming" agreement.
Due for launch in July, Unplugged would have delivered mobile phone and broadband internet services to homes and businesses throughout Tauranga and could later have been extended nationally.
However, an "eleventh hour" change to the agreement which effectively prevented Unplugged subscribers from using local Tauranga telephone numbers had forced TelstraClear to halt the project, said TelstraClear chief executive Allan Freeth.
He said TelstraClear had been faced with the prospect of either delaying the launch while it pursued legal action or going ahead with the launch of a service that was less attractive and competitive.
"Either course was unacceptable, so we made the tough decision to shut down the network and invest in other services."
Freeth said TelstraClear already had a national roaming agreement in place with Vodafone related to its earlier plans for a national mobile network. That had been amended to allow TelstraClear to proceed with Unplugged.
"They understood exactly what we were trying to do," said Freeth.
"We had a number of verbal agreements. There was even a number of handshakes involved in that."
Freeth said TelstraClear had signed the final agreement which contained the key alteration anyway "to keep our options open. We then looked at it pretty closely and saw it wasn't going to work for us so we had to stop now".
Asked if Vodafone reneged on the deal, Freeth said: "I'm not sure those words are the correct ones but certainly in terms of commercial behaviour and in terms of certainty of where we were ... that last-minute change was a pretty critical one for us."
But Vodafone chief executive Russell Stanners denied there had been any changes to the roaming agreement and said his company was struggling to understand why TelstraClear had decided the agreement was unsatisfactory.
"It was signed on March 15 and until late last week Vodafone was working closely with TelstraClear at a technical implementation level to deliver the service," he said.
"Vodafone can only speculate that there are other reasons for TelstraClear's decision which the company is seeking to mask by blaming an innocent party. This is not the first time that TelstraClear has pulled out of investment and blamed other players in the market."
Unplugged is likely to have been an expensive exercise for TelstraClear, but apart from saying the loss was "nowhere near" the project's announced cost of $50 million, Freeth said the company was "not commenting on that".
"More important is the disappointment to us and Tauranga customers."
Freeth did not rule out taking legal action against Vodafone over changes to the agreement.
Asked whether the end of Unplugged would have implications for his continued leadership of the company, Freeth said his job was to create shareholder value "and I'm very happy with the performance of the company".
The demise of Unplugged effectively ended any plans TelstraClear had of becoming New Zealand's third mobile network operator "in the short to medium term", he said.
