No cellphone network for TelstraClear

Parent company review says no investment dollars in current climate

TelstraClear will not build a 3G mobile phone network in New Zealand, chief executive Allan Freeth has confirmed, following Telstra’s strategic review.

TelstraClear had been considering building its own network in New Zealand and Computerworld understands it had gone so far as to build an initial test bed set-up in Manukau.

However, that’s not to be as Telstra refocuses its business on revenue growth in the Australian market.

Freeth says while the willingness to invest in New Zealand is there at a corporate level, problems in the short term with the regulatory regime means the money is not forthcoming.

"We spend $100 million a year simply maintaining the network we've got and we're not going to be able to get Telstra to front up with $400 million or $500 million to extend that network without some significant changes in the environment," he says.

While he maintains he will not be fighting on the regulatory front anywhere near as much as his predecessor did, he is willing to point the finger at government over the wholesale regime.

"The lack of a wholesale market and the kind of hijinks we've seen this week show us we're reliant on the government, the minister and the Commerce Commission to make the changes necessary."

Telstra chief executive Sol Trujillo announced that he was getting rid of between 6,000 and 8,000 full-time positions over the next three years — and up to 12,000 over five years — as part of his turn-around effort for the Aussie telco.

Whether or not the Australian government, which still holds a 51.8% stake in Telstra, will go along with Trujillo's massive staff reductions remains to be seen, however.

Freeth says none of those layoffs are to take place in New Zealand. Freeth has himself recently conducted an internal review and says while some layoffs will happen in New Zealand, they are of a limited nature.

“We’re on track internally and any limited redundancies will be in specialised areas.”

He says the positive changes Telstra is ringing in will impact on New Zealand, however.

“The discussions around a next generation network will be of benefit to us here and our tech guys are rubbing their hands with glee over it.” Telstra has announced it will spend A$10 billion ($NZ10.6 billion) over the next five years building an all-IP network.

Telstra Chief Operations Officer Greg Winn says the company will introduce the IP/MPLS (multi-protocol label switching) network core “by the end of 2007”.

Trujillo says Telstra has too much of everything, in a reference to the complexity of the organisation. He says Telstra will rationalise away two-thirds of its 330 network platforms and three quarters of its 1,200 business and operational systems within three years.

Telstra's mobile phone CDMA network, which is used to deliver voice calls and broadband via an EV-DO overlay to rural and remote areas in Australia, will also go. Instead, Telstra will roll out a GSM/UMTS 3G network, which according to Winn has only a quarter of the capital expenditure per customer compared to CDMA.

Other announcements included a deal with Sony Pictures for the Telstra BigPond ISP which will bring movie downloads "to PCs" from March next year and a commitment that 80% of customers will have broadband in three years, up from 50% today.

Telstra is projecting top line growth between 2 and 2.5% CAGR (compound annual growth rate) between now and 2010, but next year will see a decline in pre-tax earnings of 19-24% due to accelerating depreciation of decommissioned assets as part of Trujillo's restructuring. This figure could be up to 30% if Telstra adds provisions for staff redundancies.

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