New GSM player will bring competition on price

Reaction to Econet's arrival has been swift and mostly positive.

Reaction to Econet's arrival has been swift and mostly positive.

Econet Wireless New Zealand (EWNZ) has announced it will build New Zealand's second GSM cellular network in the next year and go into competition with Vodafone and Telecom for mobile users.

Telecommunications minister Paul Swain welcomes the move, saying competition in this area must be good for New Zealanders and this is a success for the new telecommunications environment.

"The whole idea behind the new telecommunications reforms that the government is proposing in the Telecommunications Bill is to encourage better competition and more investment in the industry, and ultimately to get a better deal for consumers.

"The Econet announcement this week is a good indication that the government is on the right track," says Swain.

The chief executive of the Telecommunications Users Association (TUANZ) Ernie Newman is also pleased with the new entrant's arrival.

"This is the first tangible result of the new regime." Newman says having two competitors using the same technology will be great for the consumer as it will drive the price down.

"At the moment we have aggressive competition but it's aimed at increasing market penetration and brand awareness with the addition of new services. It's not based on price."

Newman says the price of cellular calls has not come down as far as he would expect, despite many factors forcing down the cost of such calls.

"The price of the technology is going down as it gets smarter. The critical mass of subscribers is building and each subscriber is making more use of their phone."

However, because users cannot readily switch between providers, because they use different technology, something called churn in the industry, Newman believes both telcos have had no incentive to compete on price.

"I would say the majority of users are unaware of the technical differences and their choice of carrier is based more on branding than whether it's GSM or TDMA. Vodafone has done a superb job of positioning itself in the trendy market - having an 025 phone is a bit like wearing the wrong colour shoes at school."

Meanwhile the providers of GSM handsets and technology are also thrilled at the prospect of having two customers where before they've only had one.

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Tags cellular market

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