Telecom in front of Vodafone

Vodafone NZ yesterday conceded that rival Telecom had done an "outstanding job" in winning new cellphone customers in the fiercely competitive market.

In the three months to March 31, Vodafone NZ hooked 60,000 new customers, while Telecom nabbed 64,000.

Vodafone NZ managing director Russell Stanners said his company had been caught by surprise.

"We didn't do as well as we wanted to [in the third quarter]. We achieved our targets, but the market grew more than we expected it to," he said.

"That was the time [the second half] when Telecom did an outstanding job.

"We've been used to being the leader in terms of market share. We'd certainly like to continue doing that."

The March year saw Vodafone NZ with 55.4 per cent of the mobile market, against 54.6 per cent a year earlier. During the year, its mobile customer base rose by 284,187 to 1.89 million. These figures, however, had to be set against Telecom's much-improved March quarter and its intention to become more competitive in the cellphone market.

Telecom mobile marketing head Kevin Bowler said the company was pleased with the figures, particularly when translated into revenue terms.

He said Telecom's total (blended) average revenue per unit (ARPU) was $598 in the March year, up $4 on the 2003/04 year - against Vodafone NZ's total (blended) ARPU of $633, down $39 on the year before, which it said came through aggressive pricing competition and the acquisition of "less intensive" cellphone users.

Of Telecom's higher ARPU, Bowler said the company had "targeted higher-value customers rather than just stacking on the numbers".

"We're now starting to see in the last couple of quarters ... the benefits of being a lot more staunch about our market position," he said.

"Our initial goal has been to stabilise our share, which we've achieved, and now our goal over the medium term is to improve our [market] share position.

"We've been a challenger in this market for a number of years and it's going be a number of years before we see that changing."

The youth market was a battleground, with Telecom's $10 text proving attractive, which prompted Vodafone to launch its free text weekends, said Bowler.

"The youth market is important to us and we still believe we have the leadership position in that market."

The rival firms' 3G networks were also likely to be a focus.

"We have definitely seen more competition in the mobile market," said David Boyce, who has a "hold" rating on Telecom at ABN Amro.

"There were some really sharp offers out there from both companies in February and March."

Meanwhile, as cellphone use rose beyond 80 per cent of the population, the nature of competition would change. Vodafone NZ and Telecom would vie for market share, offering a mix of products and services, with some lower costs in the offing for consumers.

"We're not recruiting new people to mobile to anywhere near the degree we were," said Bowler.

"New services are going to be a new source of revenue for carriers, provided they are useful or novel."

- NZPA, Bloomberg