Telstra to share 3G network with Hutchison in Australia

August 4, 2004

Australia's largest mobile phone operator Telstra Corp. has agreed a deal worth A$450 million to buy a 50% stake in Hutchison Telecommunications Australia's 3G mobile network. (£1 = A$2.56)

Telstra had been considering for some time whether to share a 3G network with other telcos or build one from scratch. It believes the deal with Hutchison Telecom reduces its risk in providing 3G services.

Chief Executive Ziggy Switkowski said the deal is the most "cost and time effective way to offer 3G services to customers."

The deal would give Telstra a relatively low cost way to enter into the 3G market and also a head start over rivals Optus and Vodafone. It is estimated that if Telstra was to build a 3G network of their own, it would cost between A$900 million and A$1 billion.

Chief Financial Officer John Stanhope said "we get a tried and tested network at half the cost".

Telstra expects to launch commercial services in mid-2005 and hopes to break-even on its network investment in "four to five years" time.

Hutchison 3G Australia will benefit from the deal, as it would give them extra money to spend on expanding network coverage and customer acquisition. Analysts say Hutchison had spent A$3 billion on its 3G network, which has more than 2,000 base stations and covers major cities including Sydney, Melbourne, Brisbane, Adelaide and Perth.

Telstra and Hutchison will equally share operating and capital expenditure and will also split any profits from wholesaling network capacity. They will continue to develop and operate their own mobile telephone services. The companies expect to increase the size of the network over the next three years, expanding into Canberra and other regional centres.

Vodafone announced in May that it has selected Nokia to build its 3G network in Australia with the aim of launching services in mid-2005.