Vodafone will be hoping a key upgrade of its mobile network will stem market share losses, and prevent the battle for iPhone 5 customers becoming a two-horse race between Telstra and Optus.
The third ranked carrier will switch on “3G plus” services, which it has described as the “most critical phase” of its $1.7 billion network upgrade, at sites around the country on September 13.
However as the mobile industry braces itself for the launch of a new version of Apple’s hugely popular device, Vodafone remains behind Telstra, which announced a $400 million expansion of its 4G coverage in August, and Optus, which extended 4G coverage to retail customers last week.
Apple is expected to release the latest version of its iconic handset at an event in San Francisco on September 12 in what is being described as one of the biggest product launches in history.
Australia has one of the world’s highest iPhone penetration rates, according to Google. If the new version is enabled for superfast 4G/LTE (long-term evolution) services, as is widely expected, analysts say Vodafone, which shed 178,000 customers in the June half, is at risk of losing more subscribers, with Telstra expected to be the chief beneficiary.
HSBC’s Hong Kong-based Asian telecommunications research team expects the iPhone 5 to support LTE on the 1800 megaherz spectrum frequency, which is used by Telstra, Optus and other Asian carriers such as Hong Kong’s SmarTone.
Telstra’s 4G network covers about 40 per cent of the population in all capital cities, while Optus covers the Sydney, Perth and Newcastle metropolitan areas.
Vodafone says its network is now 4G ready with a “rapid rollout” to start in the first quarter of 2013.
“We would expect Telstra to be one of the key beneficiaries [from the iPhone launch], given its enormous head start in deploying LTE at 1800MHz,” HSBC analysts Neale Anderson and Tucker Grinnan said in a note.
“The stock has gained as Telstra has continued to take share in the face of weakness at [Vodafone Hutchison Australia], an LTE iPhone supporting only 1800 MHz could consolidate that advantage.”
CBA analysts Alice Bennett and Nathan Burley said an LTE-enabled iPhone would be a “major boost” for Telstra and justify recent Optus network upgrades.
“In our view, it could turn things into largely a two-horse race and may mean more trouble for Vodafone,” the analysts said in a note.
Vodafone says its new 3G plus services will enable it to offer speeds of up to 16 megabits per second – eight times faster than current average speeds. The 3G plus launch comes just days after Vodafone’s network suffered a significant outage throughout NSW on September 8.
As many as 1.7 million mobile subscribers in Australia will upgrade handsets “over the next several months”, according to the HSBC analysts. Telstra added 1.6 million mobile customers in 2012.
Optus is also likely to capture market share gains but to a lesser extent than Telstra, the HSBC analysts said. The second-placed carrier’s recent network upgrades “should give it just enough credibility with consumers to ensure that Telstra does not walk away with the whole market”, they wrote.
But the outlook for Vodafone Hutchison Australia is considerably more downbeat, according to HSBC.
“With limited capital and a recent history of network outages, [Vodafone] is focused on repairing its 3G network – it will not even begin to roll out a 4G network until 2013. This could result in further losses of market share over the next year.”
Telstra needs ongoing growth in its mobile business to offset weakness at high-margin businesses such as fixed-line phones and Sensis, its directories arm. Mobile revenues at Telstra grew by 8.5 per cent to $8.7 billion in the financial year to June 30, which was more than a third of its total top line.
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