Telecom says 'new tech' expectations overhyped

By Rob Hosking

Friday 19th May 2000

Both mobile telephone and internet usage continue to grow but Telecom says much of the excitement about the merger of the two is premature.

The telco's third-quarter result this week showed no slowdown in the growth of internet-data traffic and mobile telephones.

Just over 37% of the population have a mobile phone and Telecom's internet provider, Xtra, has nearly 50% more customers than it did at the same time last year, while the number of mobile connections is up just over 51%.

What is perhaps even more significant is both mobile and internet users are spending more time using those services.

The much-hyped "third generation"(known as 3G) of mobile services will allow mobile and internet to merge.

The government's much delayed and controversial spectrum auction, set down for July, will provide the necessary airspace for carriers to offer those services.

But the much-vaunted 3G services were likely to be some time off, Telecom's manager of strategy and business planning Ralph Chivers told a telecommunications conference in Auckland this week.

"Third generation is in a bit of a hype phase at the moment," he said. There is no doubt mobile data is increasingly important, but voice will be the killer application for mobile for some time."

It was likely to be several years before 3G applications come to market, he said.

Telecom's latest result showed those two areas of the business are not slackening off the steep growth track which began in 1998. But the company's more traditional areas are returning less and less to the business.

Overall, the average revenue per customer was down, chief executive Theresa Gattung said.

After-tax earnings were $205 million for the three months to 31 March 2000 - down 8.5%. For the nine-month period after-tax earnings were $611 million.

The main drag on that overall figure was Telecom's transtasman investment in the third-ranked Australian telecommunications carrier, AAPT. Exclude that purchase - which has a $17 million net impact on earnings - and other abnormals and net revenue was up 1.8% to $222 million for the quarter and 2.9% to $644 million for the nine-month period.

Local access revenue declined $10 million, or 1.5%, for the nine months and NZ$5 million, or 2.1%, for the quarter. This was partly due to a drop in business line-rental charges last year but also because of increased competition in the Wellington region from Telstra Saturn.

National revenue remained steady over the nine-month period but shows an upward flick in the last three months. An increase of $7 million, or 4%, mostly reflects the upsurge in popularity of mobile telephones.

That increase in revenue is from calls to cellphones from fixed-line phones.

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