Telecom shrugs off 3G woes in Australia

By PETER GRIFFIN

Telecom has dismissed reports of network glitches and cellphone shortages at its Australian mobile investment "3" as rumour-mongering by rivals, but confirms that its Australian customers will not gain access to 3G services for up to six months.

Hutchison Australia's fledgling 3G service, of which Telecom is a 19.9 per cent stake-holder, has been the subject of an Australian media feeding frenzy in recent days as stories dribble out detailing poor service, call centre support woes and a serious shortage of 3G phones.

Then the Australian Computer Society published a survey finding that only 11 per cent of its members believed the 3 network offered a "reasonable level of service".

Hutchison threatened legal action, saying the survey was defamatory and too narrow in scope, attracting 396 responses in 24 hours from 6500 people canvassed.

As a silent investor in 3, Telecom has steered clear of the controversy. But what has it achieved for its $400 million investment?

Head of corporate affairs Philip King said the investment was strategic and well-timed considering the number of carriers in the region who had recently revealed plans to build 3G networks.

"The sense of us having a stake in Hutchison is even more profound than it was a year or two ago."

He said present issues with 3 had been "blown out of proportion" by competitors", and suggested the market was too impatient for results from 3.

"It's never about short-run, quick wins."

When 3 was launched, Telecom said its New Zealand mobile arm would benefit from co-development of cellphone applications and a reseller agreement allowing people to subscribe to 3 as AAPT customers.

King said "small developments" were under way in New Zealand in terms of Hutchison application development and that the reseller deal "realistically" was six months away.

Meanwhile, AAPT will continue to re-sell Vodafone's 2G mobile services but face the same lack of bargaining power TelstraClear is lumbered with in its relationship with Vodafone here.

"The deal we have with Hutchison should deliver superior economics," said King.

Hutchison's operations in Australia and globally have been hit by a pre-Christmas shortage of 3G phones, although NEC and Motorola are understood to be going all-out to ship up to 3 million handsets within three months.

A lack of phones, and therefore lower customer numbers, has led parent group Hutchison Whampoa to suggest it might require €2 billion ($3.8 billion) more in funding for its 3G operations.

But a United States-based analyst for In-stat MDR, Neil Strother, said poor demand rather than phone shortages was behind low customer numbers.

"Subscribers just don't see the need to jump to video services that frankly aren't that compelling, and even with Hutchison offering some pretty awesome deals for 3G handsets, demand just hasn't taken off as hoped," he told the Herald.

Telecom's cellphone record in Australia has not been good. At considerable cost, it abandoned plans to build its own network.

But its investment in 3 makes more sense in the light of revelations that Telecom may move to the same technology platform as Hutchison, wideband CDMA.

Hutchison

* Hutchison Telecommunications Australia is a stock exchange-listed company specialising in wireless telecom services using the Orange brand.

* Hutchison Australia is 57.8 per cent owned by Hong Kong-listed Hutchison Whampoa, 12.5 per cent owned by the Roberts-Thomson family, who founded Hutchison, and 29.7 per cent owned by public shareholders.

* In May 2001, Hutchison formed a new company, called '3', to offer 3G telecom services.

* Telecom NZ owns 19.9 per cent of '3', with the rest held by Hutchison.