XT breakdown huge turnoff for prospective clients, say analysts

Telecom chief executive Paul Reynolds apologised to customers for the issues and said the company had commissioned an independent review of the network. Photo / Glenn Jeffrey

Analysts say the third failure on Telecom's XT network since its launch is unlikely to have a big impact on its bottom line but will slow the number of new customers signing up to it.

Thousands of Telecom's XT mobile customers remain without services today as technicians work to fix the network.

The problem had affected about 4 per cent of the network south of Taupo, Telecom chief executive Paul Reynolds said.

Tens of thousands of mobile customers south of Taupo have lost their connections for varying lengths of time over the past two days, after the network crashed about 11am Wednesday.

The latest breakdown follows one in mid-December that also hit customers south of Taupo and an intermittent breakdown in November.

Forsyth Barr analyst Guy Hallwright said the financial impact on Telecom was likely to be limited to any compensation package the company made, which was not likely to be very large.

But the aim of the new network was to try and move large corporate customers on to XT and for that to happen they needed to be convinced the network was reliable.

"One assumes that a company that might have been thinking of moving to it might be inclined to sit on the decision and wait a while now."

Hallwright said that could have a flow-on effect of slower growth in the network.

"The key thing is grabbing some of the Vodafone customers particularly in Auckland and these are exactly the sorts of people who will be concerned by this."

Hallwright said it was hard to know how much it would slow growth but did not expect it to have a long-term impact provided Telecom sorted out the problems.

IDC telecommunications analyst Rosalie Nelson said the breakdowns were not uncommon given how fast the network had been built.

But the number of outages now meant the damage to the brand could be significant.

"Telecom will be very aware that this is not something that can continue."

Telecom chief executive Paul Reynolds yesterday apologised to customers for the issues and said the company had commissioned an independent review of the network.

"I apologise to our customers who have been inconvenienced, but also recognise that words are not enough. That's why we are taking rapid action. I have commissioned an urgent and independent review to ensure we have taken all reasonable steps to assure customer experience."

Reynolds, who on Wednesday night said he was angered by the outages, promised the company would focus on fixing the problem before talking about compensation.

"XT is built as a world-class network but clearly should not have had these problems."

The company was working with its operations partner Alcatel-Lucent on capacity and design improvements for the network, he said.

But Ernie Newman, chief executive of the Telecommunications Users Association, said the review would need to be transparent to help customers regain confidence in the network.

"They are going to want detailed explanations about what went wrong, what has been done to fix it and how users can be confident it will not happen again."

Telecom invested $570 million on the network which began operating in May last year, offering faster data download speeds and global roaming to allow it to compete with Vodafone Group, the largest company in New Zealand's mobile phone market.

There were about 242,000 customers on the XT network as at September 30.

Telecom's share price closed down 3c yesterday at $2.41.

TELECOM XT
* A 3G mobile network launched in May last year.
* Has 242,000 customers.
* Three major outages so far.