KEY POINTS:
One of the interesting things to come out of Telecom's full-year results briefing last week was its indication that it will strengthen its ties with Australian 3G mobile operator Hutchison Telecom.
Telecom bought into Hutchison's mobile operator '3' in 2001, taking a 19.94 per cent stake.
Telecom's chief financial officer Marko Bogoievski said last week that Telecom would swap that stake for a 10 per cent share of parent company Hutchison Telecom itself, which is listed on the ASX.
Telecom can also boost its share of the company to 19.94 per cent for between A$250 million and A$300 million. Part of the shareholding change also involves Telecom allowing 3 to use some of its 850 megahertz spectrum in parts of Australia.
3 entered the competitive mobile market in Australia in 2003 with what was then cutting-edge 3G technology and flat-rate calling deals.
But handset shortages and coverage problems dogged the service in its early days as well as the fact that it only had around half the country covered - customers had to roam on Telstra's network in other areas.
Still, 3 now has around 1.4 million customers, and a large share of the 3G market, which is where the value increasingly is for mobile operators. Last year, Hutchison shut down its small CDMA network, which used the same underlying technology as Telecom's network here.
Now that Telecom is building a new network based on WCDMA/UMTS technology, it is on the same page technically, which means Telecom could be able to leverage the investment in 3 for the first time. This is what Telecom and Hutchison have been strongly hinting at in the last week.
So what could Telecom extract from 3 to use here? Two things - mobile handsets and mobile services.
In both areas, Telecom's current line-up looks anaemic compared to Vodafone's because there simply isn't as much choice in the CDMA world.
But 3 has a wide range of handsets, particularly from market leader Nokia. It also has its mobile portal Planet 3, which is a bit like Vodafone Live, featuring mobile TV, games, news services and even a location-based service truelocal.com.au which searches listings of businesses that are located close to where your mobile phone is.
Telecom has concentrated on competitive deals rather than content to attract customers in the last few years, but the new network could change that if it leverages the 3 relationship to full potential.
In the meantime, Telecom may win some breathing space to get its new network together if the Australian Government forces Telstra to keep its existing CDMA network operating longer than the telco wants to.
Telstra wants to shut its network down at the end of January, meaning New Zealand CDMA customers will not be able to roam to Australia with their mobiles unless they buy a new Worldmode phone.
But teething problems with Telstra's NextG network mean Telstra may be forced to stick with CDMA for longer. That's something Telecom's mobile bosses will no doubt be quietly hoping for.
