Aussie cellcos raise stakes to attract 3G users

26 Apr 2006

Competitors in Australia's still-developing 3G mobile market are locked in a battle to out-do each other with inducements to attract new customers.

With the industry yet to see much return for its estimated A$5 billion ($3.58 million) infrastructure investment, operators have returned to the early days of the industry with handset subsidies and are also offering new data, audio and video applications in an attempt to persuade customers to move across to 3G.

Telstra, for example, is offering handset discounts of up to A$500 ($358) to new 3G customers as the company attempts to gain ground on Hutchison, which is the market leader with more than 600,000 users.

Ironically, Telstra and Hutchison co-own a network, although Telstra is also in the throes of spending more than A$1 billion in building a network of its own.

Hutchison, for its part, is giving its 3G customers access to Hotmail services and the popular instant messaging service offered by Internet provider ninemsn, a joint venture between the Packer family's Publishing and Broadcasting and Microsoft.

In the other camp are Optus and Vodafone, which have jointly built a separate network. Vodafone is the only other provider to release 3G subscriber figures and claims that 87,000 of its subscribers are using 3G.

The high stakes in Australia's 3G market were underlined by Hutchison's recent A$547 million annual net loss, which the company is claiming as a good result despite being its second-largest annual loss in a seven-year history.

Despite accumulated losses of over A$2 billion, the company claims its first-mover advantage in 3G is starting to pay off, with its subscriber numbers up 31% over 2005 and revenues up 43%.

A more important indicator was that the 3G subscriber base grew by 58% over the year to 654,000. This growth, however, is coming at a cost, with the acquisition cost per customer up to A$355 each.

Hutchison is aggressively trying to migrate subscribers using its Orange CDMA network - with around 400,000 - across to 3G with handset and content inducements. 2G Orange customers are being offered a new 3G handset to migrate.

In February, the company merged its Orange and '3' brands and has foreshadowed a possible closure of its CDMA network, depending on its success in migrating customers across to '3.'

Despite the massive investment by the operators, there is unlikely to be much growth in Australia's saturated mobile phone industry.

Citigroup analyst Tim Smeallie recently said at a telecoms conference in Sydney that while an average post-paid mobile customer spent A$65 a month in 2004, he believed this would fall to A$45 by 2008.

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