Thursday, 3. August 2006, 21:41:47
The Auckland Gallery GuideTelecom may be planning to switch its mobile phone technology to the type now used by rival Vodafone. Market watchers said the technology had helped Vodafone achieve its market superiority in New Zealand, but the move would add hundreds of millions of dollars to Telecom's capital expenditure bill.
Telecom has not ruled out a move to the technology – known as WCDMA – but has also expressed confidence in the ability of its present CDMA network to serve its purpose.
Estimates of the new network's cost vary widely, with ABN Amro suggesting "at least $200 million" and Credit Suisse putting the cost at up to $800 million.
Though Telecom would save some costs by reusing existing cellphone towers, the cost of providing nationwide coverage would still be high.
Telecom will unveil today its full-year result and discuss its plans for the new environment brought about by recent Government changes.
The market ran hot in anticipation yesterday, with turnover in Telecom stock topping $100 million. Shares closed up 6 cents on $4.23, having gained 20c during the week.
A couple of weeks ago Telecom told analysts it was confident CDMA would serve it purposes for the foreseable future.
However, speculation is rife in the industry that Telecom has been running its eye over the figures for building a new network.
Analysts from Credit Suisse and ABN Amro have both raised the possibility, but said the technology switch was a "risk" to Telecom capital spending plans.
CDMA has about 20 per cent of the world market, as opposed to 80 per cent for WCDMA.
Telecom has said dual mode phones – those that work on CDMA and WCDMA networks – will soon be commercially available.
Yet Credit Suisse believes the phone issue will force Telecom's hand. About 40 per cent of Telecom mobiles sold in New Zealand are made by Nokia, which has said it would stop making CDMA handsets. The high-quality CDMA phones from Nokia and Sanyo have been credited with Telecom's recent resurgence in its struggle against Vodafone for market domination.
But Telecom said Nokia will still supply it with CDMA handsets made by other manufacturers.