Telstra raises the stakes

13 Nov 2006

Last month Telstra launched its 850-MHz HSDPA 'Next G'' network nationwide. Having mothballed its FTTN proposal just weeks previously as a result of 'unreasonable regulatory outcomes', Telstra management is focused on the competitive advantage the Next G network offers.

At launch Telstra is offering few enterprise applications that require the extra bandwidth of Next G - these are yet to come. Yet we believe the additional speed and data coverage of Next G alone can unlock a broader section of the enterprise market in Australia - mobilizing gray and blue collar workers in the front lines, not just white collar managers.

The biggest advantage of the new network is its reach. It covers 98% of the population, compared to 37% for Optus 3G and 55% for 3 Australia. If Next G remains undeclared for wholesale access (yet to be confirmed, but unlikely at this stage), no other wireless network in Australia will match it. Additionally, at 850-MHz, the new network offers better in-building penetration than comparable services at 2100 MHz.

This deployment was announced less than a year ago - in December 2005. Even a cursory familiarity with Australian topography gives some insight into the scale of the task facing Telstra and Ericsson. At peak workloads, engineers were upgrading one CDMA base station every 24 minutes. A total of 1,400 staff from Ericsson and partners were pulled from all areas of the business and deployed on the project. Over the whole project, engineers drove 70 million kilometers, half the distance to the sun.

In addition, Telstra has a time advantage in terms of speed offered: 3.6-Mbps peak network speed now, moving to 7.2 Mbps and 14.4 Mbps in 2007 and 2008. Competitor roadmaps are slower. In large part, we believe this is academic. What matters is that users now have a wireless broadband option that crosses the tipping point of end-user throughput of 400 to 500 kbps.

For its existing base, Telstra has upgraded the majority of its GSM network to EDGE. This will benefit a number of existing enterprise users with PDAs such as the O2 Atom, Treo, Palm and i-mate devices, the majority of which are EDGE-capable. Most of the recent handsets from Nokia (for example) are also EDGE capable.

So what about the services‾ The key application being offered is basic access to the customer's existing suite of enterprise applications, over a wide coverage area. Telstra is also promoting a range of enhanced tools around field-force automation, salesforce automation and asset tracking.

Mobilizing enterprises
None of these really require the turbo speeds of the new network. The Next G network launch, while impressive, is just the first stage in mobilizing the business market. By any estimation, this market is sizeable. According to the Australian Bureau of Statistics, 1.2 million private-sector small businesses employed 3.6 million Australians in 2001 (the date of the last census). Wireless data services in this segment have plenty of room for growth.

For Telstra, targeting this segment with Next G will mean that an ongoing decline in 'old wave' revenues will be offset by growth (CAGR of 15% over five years) in 'new wave' revenues.

Somewhat bizarrely, mobile data appears to be both old and new wave.

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