Telecom hands 027 network to Lucent

By PETER GRIFFIN

Telecom is handing management and operation of its 027 cellphone network to US equipment vendor Lucent, paying $200 million over five years in a deal that will "lower costs".

But shareholders will have to take Telecom executives' word for it. The company will not say how much it expects to save on running the network, or whether operating costs for the next financial year will fall as a result of the deal, which was revealed by the Business Herald in February.

"It's extremely complicated," said Stephen Crombie, general manager of network investment. "There's capital elements as well as the operational savings. I don't want to go to that level of disclosure."

Nevertheless, Telecom claims the deal is one of the most extensive outsourcing agreements in the world among mobile operators.

Lucent built the 027 voice and high-speed data network and will be responsible for expanding its national coverage over the next year. Telecom plans to spend $30 million.

The deal greatly changes the structure of struggling Lucent's local arm. It will take on 50 staff from Telecom. They will work in Lucent's operations centre in Hamilton and other facilities in Auckland, Wellington and Christchurch.

That boosts Lucent's staffing to about 80 and will ensure that most of its revenue over the next five years will be tied to the Telecom deal.

Only a few Telecom employees chose not to join Lucent.

Lucent's general manager, Ian Gardner, would not say what the deal was worth, "but it's a number we're happy with".

Lucent's last set of financial accounts filed with the Companies Office were for the nine months to September 30, 1997. It lost $555,000 on revenue of about $1 million.

In the last three years Telecom has also farmed out management of its ageing mobile network to Ericsson, its fixed-line network to Alcatel and its IT systems to EDS.

Meanwhile, developments in the Australian cellphone industry may have a bearing on TelstraClear's supposed plans to build a network here.

Sydney telecoms commentator Paul Budde said Vodafone's indication that it would restrict its 3G (third-generation) network to the large cities meant it would probably seek a deal with Telstra giving its 3G customers national coverage.

That, said Budde, would give Telstra bargaining power in securing a better mobile deal with Vodafone NZ. TelstraClear's talk of a network was a "bluff" to pressure Vodafone.