NZ Communications likely to focus on call value

NZ Communications has announced that its new network will be called 2degrees.

Mobile operator NZ Communications is due to announce its branding and network launch date today.

The new entrant has been playing its cards close to its chest in the lead-up to the launch, having had a few false starts in the past.

Telecommunications analyst Rosalie Nelson of IDC said the company's stance on the high cost of mobile calling in New Zealand signalled a focus on price competition.

She said in other markets new entrants had targeted pre-pay customers, attracting them with "cheap'n' cheerful" deals.

"A price-based model allows them to differentiate themselves, but that is still nevertheless a fairly significant challenge," said Nelson.

While pre-paid customers can quickly switch to take up offers by rival companies, Nelson said they tended not to be big spenders.

The latest figures from Telecom show the average monthly revenue off a pre-paid customer is $8.58.

"The costs of actually acquiring and managing those subscribers can be higher than their actual value," she said.

"So they need to be able to appeal to that market but they also need to have a higher value proposition as well."

Nelson said the company could align itself with youth-oriented retail brands such as Supre and Glassons or attach free sim cards to magazines to gain a foothold in the market.

"What we've seen in other markets, particularly with late entrants coming into markets, where there are already a number of other players, is that you need to go where the mass market is, you need to get scale and you need to try and get that scale quickly," said Nelson.

In February, the company was said to be a quarter of the way through a network build and would rely on a roaming agreement with Vodafone for areas where it had yet to build coverage.

It is also relying on a Commerce Commission investigation, due to be completed late this year, on the costs mobile companies charge each other for receiving a call from a rival network - mobile termination rates. Vodafone and Telecom have an agreement with the Government to gradually reduce the termination rate per minute down to 14c and 12c.

NZ Communications, which would be paying for calls made by its much smaller customer base, suggests a "bill and keep" approach whereby the calling revenue is kept by the originating network.

The third mobile network has been eight years in the making, a result of the gifting to Maori in 2000 of radio frequency suitable for mobiles.