Telstra Saturn distances itself from cellphone spendup

Friday 15th June 2001

By Rob Hosking

Telstra Saturn has signalled it may not hang on to the cellular spectrum it bought earlier this year.

The company was one of several successful bidders in the government's auction for spectrum to be used for third generation (3G) mobile telephone networks - but it may have all been for nothing.

Telstra corporate development manager Deanne Weir told a Business Information in Action conference in Wellington this week the business case for another mobile network in New Zealand had yet to be proven.

"I've crunched those numbers time after time and I'm still not convinced they add up," she said.

Testra Saturn spent $26.2 million on licences in the auction.

While it had been conventional wisdom for some time that New Zealand would have enough population for only two mobile networks, the prospect of 3G mobile phones - which allow users to download data and video to their mobile handsets - opened the door for another player.

Even that was now dubious, Ms Weir said.

When Telstra New Zealand and Saturn Communications merged last year, the company said the newly merged firm could build its own mobile network. At present it resells a mobile phone brand that uses the Vodafone network.

The comments come at a time of increasing disquiet about the prospects for 3G mobile internationally - from a potential pot of gold to a cauldron of ruin, as the Financial Times put it recently.

This is driven mostly by the realisation that too many telecommunications carriers paid too high a price to governments for the spectrum - especially in Europe - and that many of those carriers overenthusiastically geared their balance sheets to do so.

That is not the case in this country however, where - despite advice from officials that the government could reap $4.6 billion - carriers paid a much more realistic total of $133 million.

The comparatively low price paid here meant a third network - once viewed as out of the question, given New Zealand's low and widespread population base - was considered viable again.

But New Zealand-based carriers are still having to raise finance in a market that has become shy of telecommunications - and especially of firms that want to build 3G networks.

Further factors against another network are New Zealand's geography and increasing resistance from local residents to cellphone sites.

If it does not use the spectrum, Telstra Saturn could repeat its earlier arrangement with Vodafone. In the early 1990s Telstra New Zealand bought a substantial block of spectrum but did nothing with it until 1999, when it sold it to Vodafone as part of the reseller arrangement between the two firms.

The likelihood that New Zealand's mobile telephony scene will remain a duopoly between the Telecom and Vodafone networks was further underlined at the same conference by OECD official Daryl Biggar. "It is not clear there will be more competition with 3G mobile systems," he said.

The technology requires more cell sites than the current mobile phones - between two to three times as many - and regulators around the world are encouraging mobile operators to work together in joint ventures and the like.

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