Rants, Raves, Reviews

NZ Communications and 6 years of promises

By Gary R, in , posted: 21-Nov-2007 13:23

In 2001 Econet Wireless (now NZ Communications) announced plans to build a third mobile network. At that time Econet stated mobile communications in NZ were too expensive and that there was plenty of room for a third player who would shake the market up and offer NZ'ers some truly competitive deals.

Here we are 6 years down the track and we hear rumours that NZC will finally launch their network in 2008.

Well, the market has changed drastically since Econet threw their hat into the ring. In 2001 the NZ population was 3,880,500 and the mobile saturation stood at 60% of the population. Telecom ruled the roost with 1.269 million customers to Vodafone's 1.094 million. The mobile market was very young with lots of room for growth, Telecom had just switched on CDMA and announced plans to shut down the TDMA (025) network in 2007.

Over the last 6 years Telecom has added mobile broadband in three revisions from 1xRTT to EVDO RevA and rolled out fast mobile services to more and more places. Vodafone turned on GPRS, added UMTS and then jumped on the speed wagon with HSDPA. Plotted on a graph the innovation and investment introduced by both Telecom and Vodafone looks like a hockey stick. Also, lets not forget that Telstra Clear struck a deal with Vodafone, built and then tore down a 3G network in Tauranga and recently jumped ship to Telecom.

This year Telecom announced plans to spend $300M on a new GSM network and Vodafone now owns a fixed line ISP. Things are being unbundled, phone numbers are portable, Telecom is being split 3 ways, bit players are signing mobile deals with Vodafone, mobile data is growing, voice revenues are declining and mobile phones now out number fixed lines.

2007 is a different world from 2001. Our population is now 4.2m and by some estimates we have reached 105% mobile saturation. Vodafone rules the roost with 2.25m customers compared to Telecom's 2m. The market has been totally squeezed. Whatever business case Econet used in 2001 would now look radically different in 2007.

So, what has changed? Arguably it is price. Text messages no longer cost 20 cents and it does not cost a lot of money to call your mates. Both carriers have hit upon the concept of loyalty through revenue cannibalisation to keep customers from churning. Deals like Vodafone Best Mate and Telecom Freedom phone keep the customer on the network. There is not a lot of reason to stray. This has arguably been good for NZ'ers but the nature of on-network loyalty tarriffing has no doubt smacked NZC in the balls.

NZC has stated in the past that on-network (or closed network) deals are anti-competitive and should be banned. I see their point. I mean if you can not grow the mobile market (remember it is at 105%) you have no choice but to entice, or poach existing mobile customers from the big players. To poach customers you need to have a very compelling offer or reason for your average apathetic customer to move. In 2001 price was a very good reason to move, NZC had heaps of room to drop their pants and the customers would have flocked to NZC like moths to a porch light. In 2007 is price such an issue and how important is loyalty? Do we really want to see the Commerce Commission ban or outlaw on-net loyalty deals just so NZC at least has a fighting chance?

Personally, I like loyalty deals. I have a FlyBuys card, the local coffee cart gives me a free coffee for every 9 I buy, the bank give me points for credit card purchases and most importantly I can phone my best mate as much as I like for very little money.

NZC you should just face the facts, you are too late. While you have spent the last 6 years sitting in a mud hut trying to spark a fire with twigs, Telecom and Vodafone have Napalmed the country which, not too dissimilar to loyalty, sticks like shit to a blanket.

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Comment by grant_k, on 21-Nov-2007 14:25

That's an excellent piece of writing Jama -- all very valid points and well made

It sure looks to me like NZC have missed the boat. The only thing that is going to rock the NZ Mobile market now is when Telecom have their GSM network on line. Then it will be easy for customers to switch providers without needing to buy a new phone.

The "revenue cannibalisation" schemes will need to be even more innovative at that stage to keep customers from jumping ship.

Comment by sbiddle, on 21-Nov-2007 14:33

The irony of their complaint is that dirt cheap on-net calls have been the cornerstone of the business model for new mobile operators trying to establish themselves in the marketplace. The likes of 3, Meteor, Virgin (and other MVNO's) have all established themselves by encouraging people to move to them and bring their friends or company onboard as well by offering dirt cheap on-net calls. Even One2One started this in the late 90's when they started rolling out their network beyond their M25 coverage area.

NZC are just a bunch of moaners and to be honest I fail to see them ever gaining traction in the NZ market. I'd almost put money on them failing miserably.

Comment by Wob, on 21-Nov-2007 15:01

I agree with Grant, an excellent piece Jama - you really deserve more cheques from Google!!

I can't really see any third provider coming up with a business case justifying entry into the NZ mobile marketplace, not unless they can grow network and BTSs from seeds (fertilised with ground up old cellphones??!?).

There is always the possibility of mergers, takeovers or joint ventures. Perhaps Fonterra could build a network out of the back of milking sheds?

The only other option would be a radical change in technology. I'm sure GeekZone will be the first to announce that.

Comment by paradoxsm, on 21-Nov-2007 16:34

Excellent story! Jump off this blog and apply to the herald!

Journalism is not one of my strong points I must say.

I think NZC will die a nasty death within about a year.

I love my Telecom Flexi deal, one rate for SMS and calls to any network, yes it has a 12 month contract but the rates and deal is very rewarding.

I'm sick of being told by Vodafone people "you cost too much to call coz you are on 027" and the amount of times I bail out people by sending a message to their missus to pass on messages.

Author's note by Jama, on 21-Nov-2007 16:38

I have heard that blogging pays better than the Herald

Comment by David Lim, on 24-Nov-2007 08:33

Any idea exactly when NZC will officially launch their GSM service in New Zealand? The more carriers out there in the market, we consumers stand to win better deals! Cheers!

Comment by sillybilly, on 15-Apr-2008 21:47

Great writing! You had me after the first paragraph...

Comment by crayfish, on 15-Dec-2008 11:09

It's obvious that Voda have built up numbers by Telecom's lack of service and hype advertising because it's certainly not from service. Try contacting them. Try getting a response to an ISP problem. Try and get any service out of them and it'd be regarded as laughable if it was only funny. I wanted a store location - it gave me Hamilton - no address. Phoned the number provided and was told "We're too busy, call 777" Oh yeah???

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