After years of promises Vodafone and Telecom have some serious competition, particularly at the low end of the market, following the launch of 2degrees in August. Within a month it was claiming it had poached 10,000 regular mobile phone from the big two.

However the battle for customer loyalty has just begun with rivals trying to lock down pre-pay customers with more affordable but still binding contracts and new prices for texting, mobile broadband and downloads giving users a lot to think about.

Many are hedging their bets buying a 2degrees SIM card, but keeping their Telecom or Vodafone cards to take advantage of the various loyalty plans, which is likely to confuse subscriber numbers.

The new arrival operates its own network in Wellington, Auckland, Christchurch and Queenstown; while future cell site locations are being evaluated it customers roam everywhere else on Vodafone’s network.

Vodafone and Telecom remain under pressure from the government to reduce call prices, after it was revealed New Zealand consumers pay more for cellphone use than most other countries.

The issue has been a thorn in the side of the industry for around seven years with hundreds of millions of dollars in mobile termination fees at stake. The carriers have been given an ultimatum to drop the costs they charge each other or face some form of regulation.

Earlier this year Vodafone had about 2.5 million customers, representing around 50 percent market share shaving Telecom’s share back to around 38 percent. Telecom lost business because it hung on to its legacy network, then upgraded to CDMA which supported fewer leading edge phones and had limited global roaming. At the time the world was moving to GSM, the technology used by Vodafone.

Enhancing 3G broadband

Vodafone’s ongoing innovations and strong marketing soon put distance between the two players who had battled for equal market share for several years. Its new high end HSPA+ technology capable of up to 16Mbit/sec is progressively being rolled out around the main centres.

However, the launch Telecom’s $574 million XT mobile network has put it back in the 3G broadband game, using similar technology to Vodafone enabling the same phones to be used on both systems. The new network is capable of maximum speeds of 21Mbit/sec, or an average of 4Mbit/sec for downloads and 1Mbit/sec upstream, where it has been enhanced with HSPS+ technology.

Telecom claims 242,000 joined its XT service in the first three months of its operation.
It has been offering a range of sweeteners, including incentives for iPhone users, previously only able to operate on Vodafone’s network, to defect. It expects around 30 percent of its existing CDMA customers will have migrated to XT by the end of 2010.

Both carriers are also upgrading their rural cell sites for 3G technology giving them both much broader higher speed coverage. In October 2degrees was integrating 2100 MHz, 3G spectrum across its new network enabling it to further increase capacity and open the way for new products and services.

Meanwhile the next step up for mobile broadband networks is upgrade technology optimised for video calls and mobile television. The 4G mobile networks are three times faster that the 3G networks operated by Telecom, Vodafone and 2degrees, with peak speeds of 50-60 Mbit/sec, although the average is likely to be 8-12Mbit/sec.