Vodafone says 3G demand racing ahead

Vodafone says demand for 3G services such as video calling has been strong and the mobile phone giant's earnings have surged by nearly a fifth in the last financial year.

Net profit for the year to March rose from $154 million to $182 million. Sales rose from $1.07 billion to $1.2 billion.

The results did not include any contribution from its new 3G services, launched in August, but next year's earnings should.

Finance director David Sullivan said the 3G services, including video calling, music downloads and mobile television were having a "great uptake".

"[There is] increasing activity in the mobile market space, customers are choosing to use their mobiles more and more ... there's a lot happening and it's competitive."

His comments echoed the enthusiasm of Telecom chief executive Theresa Gattung, who will tomorrow face shareholders at her company's annual meeting in Christchurch.

Presenting Telecom's full-year results in August, Gattung said: "The star of the quarter would have to be New Zealand wireless, just a fantastic result."

She added that she was "amazed at the propensity for customers to take up value-added [3G] services".

Telecom said its mobile revenue sales, driven by the introduction of 3G, rose 15.8 per cent to $709 million.

But Telecom still plays second fiddle to Vodafone which had 55 per cent of the market as of March.

Vodafone said its customer base grew by 284,187 during the year to reach 1,891,386 customers.

Sullivan said investment of hundreds of millions of dollars last year would continue at similar levels this year.

"Our goal is sustainable revenue growth and our numbers show we are achieving that," he said.

Chris Loh, IDC senior analyst for telecommunications, said Vodafone could have shown greater growth had its 3G network been launched earlier than August this year, compared with Telecom's T3G, launched last November.

"Vodafone have had a much more expensive deployment for the technology," he said. "But it's consequently allowed them to develop much more substantial services at this stage and a stronger infrastructure."

Now both companies are running third generation networks, Loh says, the coming years will be a battle for the mobile market.

"The next two years are really important for New Zealand because the user demand on the back of 3G is going to play out depending on how both companies convey the value proposition of these new services."

Meanwhile, Telecom's annual meeting could be a bumpy ride with the Shareholders Association asking the questions.

Des Hunt, the association's corporate liaison, said a letter was sent to Telecom chairman Roderick Deane last month asking why Gattung's base salary was increased from $1 million to $1.1 million for the year ended June 30.

"I think companies are making a big mistake when they increase a base salary by such a large amount," Hunt said, "and then in the next breath expect unions and anyone else to accept 3 or 4 per cent."

He also said a lack of technical and engineering expertise in the boardroom could hinder the leadership of the company.

In reply, Deane said Gattung's total pay, including incentives, was $2.79 million - lower than the previous year's $2.83 million.