Vodafone out to grab share of fixed lines

Chief executive Arun Sarin made the announcement in London.

Telecom is set to face serious broadband competition from arch-rival Vodafone as the local loop is unbundled.

The world's biggest mobile phone provider has announced a dramatic new direction, with chief executive Arun Sarin saying the company will enter fixed-line markets by reselling DSL broadband services.

Sarin made the comments at the company's full-year results briefing in London late on Tuesday night (NZ time).

Vodafone New Zealand finance director David Sullivan yesterday confirmed the strategy.

"We see our future growth opportunities being in the total telecommunications marketplace," he said.

"What we need to be able to do is offer comparable services that customers enjoy if they have a fixed line. It may mean we will consider reselling or wholesaling DSL if it suits us commercially to do so."

Industry analysts said the change in strategy was overdue, with Vodafone clinging to its mobile-only mindset for too long. The company is at a competitive disadvantage to full-service providers, who are able to offer customers mobile, broadband and fixed-phone bundles.

"This is a move they have to make ... they were the last bastion of that [mobile only] view," said Neale Anderson, telecommunications analyst for Ovum in Melbourne.

"In a way, Vodafone is less of a global phenomenon than it once was [because of it]."

Thomas Geitner, head of the parent's new businesses and innovation unit, told analysts that while Vodafone would initially resell DSL broadband, it could look at investing in unbundled local loops. The Government last month announced it would force Telecom to unbundle its loop, with the legislation expected to pass by early next year.

Financial analysts said Vodafone, as a full-service provider, had the size and clout to pose a big threat to Telecom.

"They have 2 million customers and probably have the biggest cashflow of any competitor in the country," said an analyst who asked not to be named.

Telecom shares dropped 1c to close at $4.49 yesterday.

Sullivan said Vodafone NZ was not discussing a DSL resale arrangement with Telecom but hinted that such talks had taken place.

"There are always commercial negotiations going on around trafficking and network access."

He said it did not make sense for Vodafone to resell DSL services yet because the speeds were low.

Vodafone is boosting the speed of its mobile broadband network to about 3.5 megabits a second in September, which is also the fastest speed offered on DSL.

The company said its network would eventually be capable of speeds up to 14 megabits.