Amid slow XT sales, Telecom accelerates wholesale plans

At Telecom’s September quarter financial update this morning, chief executive Paul Reynolds conceded that his company had signed fewer connections to its mobile network than it had hoped by this point.

By September 30, there were 242,000 XT connections, 64,000 of them new to Telecom. The carrier lost 85,000 from its older CDMA network. Of the 242,000 XT customers, 72% were postpaid.

However, Dr Reynolds said that although the number of XT connections “is not up to our expectations yet”, Telecom was “catching up”.

Further, XT had had a positive impact on average revenue per user. Looking at like-for-like customers who had upgraded from CDMA to XT, the average user spent 16% more per month on the new network, said Dr Reynolds.

Cost of subscriber acquisition was slightly lower than budgeted - although the flip side was, according to Geoff Zame of Craigs Investment Partners, “underwhelming handset subsides” that hindered update.

Mr Zame also noted that the blokey Richard Hammond-fronted XT campaign was judged the worst commercial of the year by Fair Go, and could have been a misstep at a time when women are under-represented in Telecom’s mobile base (the campaign also featured business woman Annah Stretton and stuntwoman Zoe Bell).

2degrees launch a success
“2degrees had a successful launch,” Dr Reynolds allowed.

Earleir this week, Mr Zame said 2degrees had passed the 100,000 connection mark in its first 12 weeks, blitzing past expectations. (2degrees chief executive Eric Hertz, as ever, declined to give any numbers but said the analyst has "underestimated our success".)

However, many customers are now pocketing two SIMs, and it remains to be seem how many are merely experimenting said Dr Reynolds today.

The Telecom boss characterised his company’s recently back-from-the-dead $12 txt plan as part of a broad-ranging marketing ramp-up ahead of Christmas rather than a defensive action against the newcomer.

XT had also allowed Gen-i to win more corporate services business, said Dr Reynolds, including Air New Zealand.

And international roaming revenue had doubled thanks to XT.

Xtra fast XT
Looking ahead, data update - including notebooks with built-in 3G - would determine the success of next-generation telco networks all around the world, said Dr Reynolds.

To this end, he reaffirmed that Telecom would launch its first major upgrade of XT by Christmas. Based on HSPA+ technology (also being trialled by Vodafone for a 2010 rollout), the upgrade will allow for theoretical maximum download speeds of 21Mbit/s, and real-world speeds of around one-third that, depending on network traffic and location.

New “XTT” data cards that support HSPA+ will be available in days. However, Telecom Retail chief executive Alan Gourdie said it would likely be six to eight months before HSPA+ compatible cellphones came on the market (carriers worldwide are waiting for phone makers to catch up).

Accelerated wholesale plans
When its 3G network first launched in May, Telecom announced it would be 18 months before any “mobile virtual network operator” or MVNO partner could launch any XT-based plans.

Key Telecom mobile partner TelstraClear promptly jumped ship, and is due to migrate its 20,000 or so mobile customers to a rebadged version of Vodafone’s 3G service by Christmas.

Vodafone already has two big MVNO partners - CallPlus, which has already launched two rebadged version of Vodafone’s 3G service, CallPlus Mobile and Slingshot Mobile - which will shortly be joined by Orcon Mobile. CallPlus and Orcon are New Zealand’s fourth and fifth biggest ISPs. The smaller Compass Communications and Black+White are also onboard.

This afternoon, CallPlus GM Mark Callander told NBR his company's MNVO programme "It is going very well and ahead of initial forcasts with over 1,000 mobile connections in the first 4 weeks. Vodafone has been a very proactive wholesale partner and there are some exciting developments planned for the new year to strengthen the MVNO proposition."

Telecom, by contrast, has been left with a single MVNO partner: business specialist Digital Island.

Now, the 18-month restriction seems to have gone out the window. Telecom Wholesale boss Matt Crockett said at this morning’s briefing that his company would be making an MVNO partner announcement in the next one to two weeks.

Both Telecom and Vodafone have embarked on the MVNO path because they prefer to lose customers to a wholesale partner than the opposition, and to keep the Commerce Commission monkey off their back. Or at least reduce its pawing a little.