Telecom still in with a chance

By RICHARD BRADDELL Utilities writer

A deal between Telecom NZ and Australian mobile operator Hutchison to build a third generation mobile network may be the clincher in Vodafone's bid for Cable & Wireless Optus.

The Business Herald understands such an agreement, which in turn depends on Vodafone getting Australian Competition and Consumer Commission approval, would involve Telecom's becoming part-owner with Hutchison of a mobile business with potentially 1.7 million customers.

Telecom has looked a distant third in the race for control of Optus, but its supposed deal with Hutchison may be pivotal to Vodafone's success, since the ACCC wants assurance that there will continue to be a credible third network operator in Australia.

Under an already public agreement, Vodafone has agreed to hand over one million customers to Hong Kong-controlled Hutchison, whose 400,000 customers are already serviced from Vodafone's network.

But while Hutchison would end up with a respectable 1.4 million-strong customer base, that may not be enough to satisfy the ACCC because of Hutchison's reliance on Vodafone's infrastructure.

A source close to the dealings said Telecom would have a role because Hutchison's 58 per cent shareholder, Hutchison Whampoa, may be unwilling to invest more money on a new network.

Under the agreement supposedly mooted with Hutchison, Telecom would pay the cost of the new third generation network in return for a stake in the new mobile company.

With AAPT's own 300,000 mobile subscriber base, the new company would have a customer base of 1.7 million, cementing its position as a viable operator that could justify building its own network based on new third generation standards.

Hutchison last week told the Australian Stock Exchange that talks had taken place with Telecom, although it denies any agreement has been reached.

Telecom chief executive Theresa Gattung told analysts two weeks ago that discussions were taking place with all the participants in the Optus tender, but gave no further details.

Telecom has suspended construction of its own second generation CDMA network in Australia and is unlikely to resume it.

But much of that $A125 million ($150 million) may be rescued if the third generation network goes ahead.