Key Points:

Telecom has confirmed plans to build a new $300 million mobile network, in what analysts say is an attempt to hold on to its corporate customers.

As reported by the Business Herald last week, Telecom is in the final stages of negotiating a deal with Alcatel Lucent to build a new high-speed mobile network.

Simon Moutter, chief operating officer of Telecom's business division, said building a wideband CDMA (WCDMA) network would give customers a greater choice of mobile handsets, "real" global roaming capability and improved broadband speeds.

The new 3G network uses GSM technology - similar to that used by competitor Vodafone - to handle mobile calling, video and high-speed broadband.

"It clearly solves the challenges that Telecom has faced for many years around access to devices at competitive prices in the smaller CDMA2000 world," Moutter said.

Fewer than 20 per cent of mobile networks around the world use Telecom's current technology, meaning customers have reduced handset choices and international roaming options.

A decision to upgrade its network became increasingly necessary after Telstra announced it would be closing its CDMA network next year, leaving Telecom without an Australian roaming partner.

"It [the new network] supports a very strong global roaming proposition in tandem with our imminent launch of full WorldMode capability on the dual chipset WorldMode devices," said Moutter.

Last month Telecom announced a deal with Hong Kong mobile operator CSL to allow customers to roam on networks in 180 countries using WorldMode handsets.

The WorldMode phones work on Telecom's current CDMA network as well as the GSM networks more common overseas.

Forsyth Barr analyst Greg Main said the closure of Telstra's network was driving corporate business to Vodafone.

Main said Telecom had also estimated it was missing out on $100 million of revenue to Vodafone from mobile users roaming on its network. "They perceive there is a market there that isn't an overly competitive market at the moment."

Moutter said Telecom had spent several years investigating a network switch and had come to a decision "in the last day or so" that construction of a wideband CDMA network was worthwhile.

"During that time the price of building this network has reduced by at least 50 per cent over the numbers we talked about two or three years ago."

Moutter said Telecom had come to a commercial arrangement which meant there would be "very little impact" on its operating expenses and it could run two networks together "without a large cost bubble".

He said work on the network, which will operate in tandem with its existing mobile network for at least five years, would begin before the end of the year. It is expected to go live in late 2008.

"We do remain totally committed to our CDMA network and we are willing to guarantee our customers that their current mobile phones will continue to be supported by Telecom's for at least the next five years. In my view the network will far outlast the devices in the market today."

Telecom shares closed down 11c yesterday at $4.61.


* $300 million to be spent on new mobile network over two years.

* Cost is $200 million more than if Telecom stuck with current network.

* Plan will allow better roaming and handset options.

Plea for more time fails

The Commerce Commission has rejected a Telecom request for an extension to the deadline for handing in terms by which competitors will access its network.

In letters this week to Telecommunications Commissioner Douglas Webb, Telecom said it would have difficulty meeting the deadlines set down to deliver conditions for local loop unbundling.

Telecom's chief operating officer for technology and enterprises, Mark Ratcliffe, said the company was working hard to meet the commission's deadlines but asked for another 2 1/2 weeks beyond the June 12 due date.

Ratcliffe said a considerable amount of work was involved in the process, particularly as the company had undertaken detailed consultation within the industry.

"To get to this point was a long and involved process. The key point is that it is not just about putting something down on paper; there is a significant amount of behind-the-scenes work done to ensure we can deliver what we say.

"We remain confident that if the commission grants the relief Telecom is seeking, this should not necessarily result in a delay to the market delivery dates we have previously referred to."

But the commissioner was unmoved, saying he was concerned by the need to ensure the integrity of the process for all parties and prompt delivery to the market of the key services that would promote competition.