TelstraClear and Telecom may unite on 3G network

By CHRIS BARTON, IT Editor

TelstraClear is in secret top-level talks with rival Telecom about a partnership to build its third-generation ("3G") mobile network.

Such a partnership - known in the industry as an "MVNO", a mobile virtual network operator - would allow TelstraClear to sell and manage 3G mobile services under its own brand while using Telecom infrastructure.

It would also provide a means for Telecom to make a transition to the dominant "wideband CDMA" standard for 3G networks which enable videophone and multimedia services.

Ericsson chief executive Carl-Henric Svanberg, at a technology and strategy summit in Beijing, told the Herald that partnering - even with an arch rival - was a good way of getting into 3G for operators that have an existing 2G network and a way to offset some of the $350 million to $500 million cost involved.

"You want to go [into 3G] in some sort of step, so you say, 'Why don't we partner in an initial phase so we don't double-spend here'.

"But it's an intermediate step. You need your own network in the long run. Some partner in rural areas and own their own network in the major cities," he said.

Telecom spokesman John Goulter confirmed discussions were taking place. He said some sharing of network build made sense, but no decisions had yet been made.

TelstraClear spokesman Mathew Bolland said the company did not discuss commercial arrangements but it would be an efficient investment if the cost of a new network was shared among a number of players.

Svanberg predicted the wideband CDMA standard would be used in 80 per cent of the world's 3G networks, with CDMA 2000 getting the remaining 20 per cent.

The latter is the logical fork in the 3G road for Telecom to follow because its current 2G "027" network naturally upgrades to more advanced levels of CDMA 2000.

But Telecom may want to keep its 3G options open because it also owns a 20 per cent stake in Hutchison 3G Australia, which launched the "3" wideband CDMA network there in April and now has 85,000 subscribers.

The move would also position Telecom to compete more aggressively with Vodafone, which announced in August plans to build its own wideband CDMA network.

An MVNO partnership would provide Telecom with business options including the possibility that a third-party group of investors could finance the initial phase of a 3G rollout. Equipment vendor financing would be another possibility.

Last month TelstraClear deferred its decision on a wideband CDMA network until February, saying products from Ericsson, Siemens and Nokia were being considered.

Early in the month Telecom chief Theresa Gattung said her firm might buy wideband CDMA sites and build some network capability.

It has also commissioned Ericsson to do a radio planning exercise for a wideband CDMA network.