Getting connected in the Islands

By PETER GRIFFIN

The scattered islands of the Pacific represent a telecoms market that will be worth US$1.8 billion ($3.2 billion) this year, with Telecom, Telstra and Vodafone all taking slices of the pie through Pacific island joint ventures.

In a report examining telecoms and internet operations in the region, Sydney-based telco analyst Paul Budde says fundamental improvements have been made to communications infrastructure in the Pacific, but services will remain limited for years "unless capital investment levels are dramatically increased".

Violent storms, political unrest and poverty have made major operators cautious about putting money into the region, where most services are provided under state monopoly.

For those who have invested, the pockets of inhabitants across the Pacific represent high growth markets, though the numbers are minuscule compared with mature telecoms markets.

Vodafone's sole interest in the Pacific is its 49 per cent stake in Vodafone Fiji, a joint venture with Telecom Fiji. But, with 90,000 subscribers already using its GSM network in Fiji, Vodafone runs one of the largest mobile operations in the Pacific.

Budde estimates the mobile business is growing at 25 per cent a year off a low penetration rate of 11 per cent.

Vodafone has invested more than US$45 million in its Fiji operation, where it can reach more than half the population with cell sites, and employs around 100 people.

Telecom New Zealand has a 60 per cent stake in Telecom Cook Islands, and shares a monopoly on telecoms services with its co-owner, the Cook Islands Government.

The Cook Islands' 21,000 inhabitants have 5900 fixed phone lines, says Budde.

Telecom also owns 90 per cent of Telecom Samoa Cellular which operates a newly upgraded mobile network, he says, and satellite operators such as PanAmSat and Intelsat, equipment vendors such as Alcatel and Ericsson and internet providers also are active in the region.

Telecom's international business general manager, Anthony Briscoe, said the businesses in Western Samoa and the Cook Islands were "solid", but had limited potential.

"With no [undersea] cables into the region, growth's going to be limited by the throughput of satellite," he said.

Tourism would be the major demand driver, Briscoe said, but sluggish economic conditions and political instability would slow development.

"Parts of Samoa don't even have power. There's a lot of infrastructure to go in before I see a boom. With what's going on [politically] in places like Papua New Guinea and the Solomons, I don't see a huge upswing coming."

The Pacific investments make a small contribution to Telecom's international business, which generated revenue of $500 million in the year to June 30 last, and earnings of $99 million.

Telstra maintains a single investment in Telecom Services Kiribati, a joint venture with the Kiribati Government.

A telecoms pioneer in the Pacific, global operator Cable & Wireless, operates in Fiji, Solomon Islands, Tonga and Vanuatu. The four island nations use the company's internet exchange in Hong Kong.

Budde says internet access is another growth industry in the Pacific, where penetration averages less than 25 per cent across the region, largely confined to urban centres.

Most islands have a single internet provider, which keeps dial-up internet prices high.

Island nations such as Tonga and Tuvalu had cottoned on to a money-spinner, selling the .to and .tv domain name suffixes to foreign companies.

"They offer 'catchy' domain names under their country code and are generating interesting revenues from this service," says Budde.

In 1999, Niue was the first country to have more internet hosts than inhabitants - 20,000 hosts and a population of 2500. The Federated States of Micronesia has sold its .fm suffix to 1000 radio stations.

The Southern Cross cable network passes through Fiji on its way to the US, so that island nation is the only one with a high-capacity fibre link to the world.

Budde says Fiji's US$22 million investment to connect to Southern Cross gives it a huge advantage over other island nations less well linked to the information superhighway.