Telecom close to 3G resell deal

By PETER GRIFFIN

Telecom is calling for patience in extracting a return from its $400 million investment in an Australian mobile venture, saying the value of the purchase will soon be realised.

Head of corporate affairs Philip King, speaking ahead of the company's full-year result briefing to be held tomorrow, said Telecom's Australian arm AAPT was close to signing a deal to resell the third-generation mobile service of Hutchison 3G, which Telecom bought into in 2001.

"Why haven't we done it yet? Everyone's realised the 3G business case has been slower to materialise than originally thought," said King, who cited the process of "bedding-in" a new network and acquiring mobile handsets as issues that had faced Hutchison.

Telecom has also been slow to adapt Hutchison content for customers on its mobile network here.

King said it was still the intention to do so and that Telecom had the licence for using Hutchison content here, ruling out other players offering the same services.

But Telecom's arch-rival Telstra was also hammering out a deal that would see it share Hutchison's 3G network to get its own services off the ground.

Hutchison said last month that it was in talks with Telstra, prompting Goldman Sachs JB Were to say such a deal could "irrefutably change their mobile industry landscape".

A Telstra-Hutchison tie-up would ironically aid Telecom as a Hutchison shareholder, but may see Telecom and Telstra entering the Australian 3G market at the same time, with similar services.

King said that for Telecom's Australian arm AAPT, it was a case of being realistic and "parking your ego". AAPT had no aspirations to be a major 3G player, but wanted access to the Hutchison services to bundle mobile with its other voice and data products.

He said telcos were keen to share infrastructure to save costs and Telecom had pursued a similar network-sharing deal with Vodafone and TelstraClear here. Those talks came to nothing.

While offering its customers a re-sold mobile service from Vodafone, AAPT was keen to begin offering Hutchison's service because the economics of doing so were better.

King was confident Telecom would be able to differentiate itself from Telstra's offering.

"If [Hutchison] were to conclude a deal, Telstra would likely sell their own brand of services using the same infrastructure," said King.

"Our intent is to be the first reseller of the Hutchison 3G service."

Questions about its mobile operations are likely to dominate Telecom's results briefing. The company has flagged a write-down of its old 025 network that analysts suggest may be as high as $74 million.

The write-down is likely to have hit Telecom's profit for the three months to June. The high number of customers defecting from Telecom to Vodafone is also likely to come in for scrutiny, as is a $40 million investment Telecom has signalled to upgrade its 027 network for faster data services.


* Telecom pared back advertising by 23 per cent in the first half of the year, says Nielsen Media Research. The telco spent $19 million on advertising in the period, down from $24.6 million in the previous corresponding period.

Vodafone raised its ad spend by 23 per cent to $15.3 million as it targeted business customers with its "Mobilise" campaign.