In my experience over the last 15 years with Mobile network deployments there have been a bunch of hypotheses about what you can do to attract customers to your network. These have included products and services, video, social networking - all the 'next big things'.
In the end, it does not matter about differentiating on features and services if you haven't got three basics at the same level as the rest of the market. In order, they are
1. Coverage (Where can I use it?)
2. Handsets / Devices (What devices are available?)
3. Price (How much does it cost? Can I afford it?)
This is what customers repeatedly have told me when I have asked them what is important. In fact, given the benefits of mobility customers surprisingly rate Price significantly lower than coverage or handsets.
Most of Telecom's strategic errors around mobile have been when they have forgotten about these 3 fundamental truths - in particular the first. I consider roaming as part of coverage - and Telecom has been on the back-foot here for about a decade. In particular, apart from a period recently when these elements were equal, most of Telecom's major losses in market share have occured when the people involved in setting strategy have been too worried about the economics and trying to engineer a short-term position. But I am off topic now.
Back to the rumour - Why would Telecom look at this particular path?
Marketing wise, they have been saying that they have the best nationwide data network (true - CDMA in NZ is still the best natiowide mobile data networ) and a global roaming proposition (true). The issue is that it's a very limited range of devices that can handle this and when it comes to data, a key part of mobile now, the global proposition is non-existent for UMTS. Worldmode phones, while great, only operate on GPRS as far as I know. And there is a very small selection - 3 at my count out of the portfolio of 24.
This position gets even worse with the current stated proposition for WCDMA. 3 urban cities at launch and nationwide EDGE network. Not good enough. It reminds me of BellSouth's entry into the NZ market. Lots of marketing and a very inferior coverage proposition. Many years after Vodafone bought BellSouth and had pretty much equalised on coverage , I still had Telecom customers tell me they were still with Telecom because of the vastly superior coverage. Power of brand...
So a quick assessment of the speculated 850MHz nationwide network. Why would Telecom do this?
1. Coverage - given the current plan this would provide a massive boost for local data coverage, allowing Telecom to switch off its CDMA network earlier. It doesn't add anything significant for global roaming. The global roaming game is at 2100 MHz for WCDMA - end of story. Anyone trying to convince you of anything else is dreaming.
2. Handsets - This is the tough one to swallow. This strategy does not help the handset situation at all. It means a more specific spec for handsets which means less range to select from. My guess is that Telecom will be forced to run a reduced portfolio compared to Vodafone locally. All they can do is ensure they have a set of choices for each price-point . Shouldn't be an issue at the mid-range but I would anticipate issues at the low-end and the high-end. Telecom may try and offer low-end at CDMA. This would follow the same path tried for trying to maximise the value of the TDMA network. That didn't work. This won't either. Don't do it!!!
3. Price - Telecom will have a relatively empty WCDMA network. Where they could really do well is if they do what Vodafone didn't do when they launched their 3G network. Offer a really sharp data plan.
So, if you are an investor in Telecom stocks consider the following
1. If Telecom announce an 850 MHz network AND can talk to a reasonable set of handsets tomorrow then this is very good news. Especially if the focus is coverage and handsets as opposed to video services etc. If CDMA closure is announced, even better. Means that the long-term picture for Telecom's mobile business is built on a reasonable foundation.
2. If there is no word on 850 MHz network then it is too late for this to be available for launch - doesn't rule it out but means another year of pain in Mobile. Whether you hold or sell will depend on the commentary around mobile.
3. If the rumour is squashed and the focus is all on ecosytems of products and services then be very very worried. Those don't matter if you don't have coverage and handsets sorted. Value down the mobile component of the business and cash-out while you can.
If it was me, I'd do the following
1. Roll out 2100 UMTS as far as you can - aim to make this the core of the network. take the capital hit now and a long-term view on return
2. Backfill with 850 UMTS - necessary evil and provides a short-term coverage advantage if you go full nationwide. Or worst case equalises this position.
3. Aim to close down CDMA in 3 years. Most customers will swap out their handsets in this period anyway. Find ways to make this work without blowing cost of sale.
4. Introduce an all you can eat data plan that goes where Vodafone can't easily follow - look for their profit pool and nuke it. Great for customers and great for the revenue line.