Sour tone greets mobile rate cuts

By PAUL BRISLEN


Vodafone New Zealand would have to consider staff layoffs and reduced investment should the Government regulate the cellphone industry, chief operating officer Sir Julian Horn-Smith said yesterday.

Horn-Smith, in New Zealand on a brief visit, was commenting on the Commerce Commission's release of a draft determination in which it recommends cutting cellphone termination rates from 28c to 16c. He said the company had seen mobile rates regulated in various countries and it seldom worked.

"In Britain, all that happened was [British] Telecom trousered the cash and the customers didn't see a penny of it."

Vodafone and Telecom have claimed there is no need to regulate an industry that is already highly competitive.

Horn-Smith said Vodafone had invested about $2 billion in New Zealand, for a return of about 7.5 per cent.

"If they introduce mobile regulation that return falls to 4 per cent and what's the point in that?"

Vodafone NZ managing director Tim Miles said the on-going assessment of the cost of providing the Telecommunications Service Obligation was another tax on competition in the telco market and that, combined with this new regulation, sent a simple message: don't invest in New Zealand.

"We've got this $25 million bill for losses in the fixed-line business when we're not in the fixed-line business, and now we're faced with this," Miles said.

"It's safer to put the money in the bank."

Vodafone had introduced competition in a market that was dominated by Telecom, he said.

But Horn-Smith and Miles were upbeat about Vodafone's impending introduction of a 3G network. Horn-Smith said the company's global operation meant it had tremendous leverage over technology suppliers, meaning it could deliver quality of service to customers here.

"We plan to offer a depth of quality in our 3G service. We're not talking about a wide-area coverage but a heavy coverage in the areas we operate," he said.

Initially, Vodafone will introduce its 3G network in the main centres, extending to the rest of the country as demand increases.

"We'll take full advantage of our international brands to deliver compelling content that customers actually want," Horn-Smith said.

Vodafone could deliver high-quality music as well as video clips and full video-conferencing.

The company will spend about $400 million on its 3G network in New Zealand.