Vodafone opens its wallet

By PETER GRIFFIN

The telecommunications industry is set for a huge cash injection with the long-expected news from Vodafone that it will spend "hundreds of millions of dollars" building a third generation mobile network.

But Vodafone has ruled out sharing the cost of building its new network with current customer TelstraClear, which itself has tentative plans to enter the 3G fray within 18 months.

Analysts are sceptical that the country will be able to support two or three advanced networks.

Vodafone managing director Tim Miles said he was interested in TelstraClear and other companies buying capacity on the new network, but that Vodafone would build the network itself.

"What we aren't going to do is share the building of this.

"The lesson we've learned from overseas is that if you can, do it yourself. With joint ownership, things become much more complicated."

Vodafone may become the first local operator to move to true 3G, the most advanced technology platform for mobile operators.

But the race is on. TelstraClear has shortlisted Nortel Networks, Ericsson, Siemens and Nokia as potential builders of its own network.

TelstraClear chief executive Rosemary Howard said Vodafone's 3G intentions would not deter TelstraClear, which has no mobile network, from developing its own 3G plan.

"We're in front of them on this process, our [request for proposal] is out there, we're not going to slow down and wait for them."

TelstraClear is considering becoming a network operator because it is dissatisfied with a deal it struck with Vodafone that allows its customers to use Vodafone's network via 029 cellphones.

But TelstraClear is taking a more cautious financial approach to 3G, expressing a desire to share the cost of network construction with other parties - potentially utilities, internet providers or private investors.



TelstraClear is understood to be considering revenue-sharing partnerships and equipment vendor financing options.

Vodafone's Miles would not say exactly how much money would be spent, but much of it would be invested in the next two years.

3G provides higher access speeds allowing services such as videoconferencing, multimedia and a wider range of business applications.

"It's never going to replace fibre-optics," said Miles. "But more applications will be able to be written around wireless."

Vodafone is likely to build in the main centres first, with users transferring to the existing GPRS network as they move outside 3G coverage.

Miles said the lesson from Hutchison Australia - that country's first 3G operator - was that the early players experienced mixed success.

"It's not all wonderful [news]. Video telephony is not the winner that people thought it would be. There aren't 50 magic things we'll be able to do when we launch it."

Sydney-based telecoms analyst Paul Budde said if the coming 3G war was based solely on mobile-type services, Vodafone would win.

If TelstraClear, however, could offer wireless alternatives to fixed-line services, it might gain the upper hand.

Either way, the developments would mean losses, as there could be only one or two winners in such a small market.

"There clearly is no business case whatsoever for the launch of competing nationwide 3G infrastructure in a country the size of New Zealand." Telecom for its part claims it is already a 3G player with its CDMA1x network, which delivers speeds less than 3G.

General manager of Telecom mobile Kevin Kenrick said it could also upgrade to the same 3G standard as Vodafone plans, but that its focus was on its existing network and wireless "hotspots" where users could access high-speed services.