Michael Sainsbury | August 20, 2008
TELSTRA has launched the latest offensive against its main rival Optus by allowing No 4 mobile player Hutchison to use its Next G network in areas where the smaller company does not own a network, in a deal worth more than $120 million year.
The news came as Hutchison unveiled a half-year loss of $85 million with strong revenue growth of 24 per cent and customer numbers that are expected to surge past 2 million by the end of the year.The new arrangement will allow Hutchison, which is growing faster than Optus and No3 mobile group Vodafone, to compete for customers in 96 per cent of the country by the second quarter of next year.
Hutchison will also build its own network to another 4 per cent of the country, taking its coverage to 60 per cent of the Australian population.
The deal reverses Telstra's earlier refusal to allow others to use its Next G network.
"The new roaming deal between Hutchison and Telstra is a significant shift in Telstra strategy regarding its Next G network," Citi senior analyst Tim Smeallie told The Australian.
"This now means that competitive coverage differential between all four operators has now closed.
"The question for investors regarding this deal is what has changed Telstra's mind? Was it a risk of softer Hutchison wholesale revenues or is it a case of Telstra believing the speed differential on Next G is sufficient that three is not seen as a threat?"
Mr Dews said the company's latest move would result in a better deal for Hutchison shareholders.
"Our roaming prices will come down as a result of this deal," Mr Dews said. Hutchison still has its own 850Mhz spectrum.
"There is potential within the joint venture with Telstra, on your own or any other alternatives," he said.
"We have always said that we would consider commercial proposals for wholesale access to our 3G 850 Next G network and we have done just that," Telstra spokesman Peter Taylor told The Australian.
"This deal allows us to build on a revenue stream from a long-term valued wholesale customer by offering a limited form of 3G 850 roaming."
Once the roaming arrangement commences next year Telstra will maintain its market-leading speeds and coverage as only its Next G network operates at 14.4Mbps and provides coverage to more than two million square kilometres.
Hutchison yesterday posted another loss for the half at $85.4 million, $111.9 million lower than for the same period last year.
Earnings before interest, tax, depreciation and amortisation increased to $90.3 million, a 187.6 per cent improvement on the prior corresponding period.
Earnings before interest improved to a $31.1 million loss from an $88 million loss, a 64.7 per cent reduction.
"The industry-wide results were pretty predictable. The main change in the dynamic during the year would be the aggression of Optus," Mr Dews said.
"We are expecting the strong growth we saw at 3 in the first half to continue in the second."