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Vodafone Hutchison Australia may skip digital dividend auction

Vodafone Hutchison Australia has indicated that it may pass on participating in the digital dividend spectrum auction, and instead focus on network improvements and rolling out a long-term evolution network in the 1800MHz spectrum band.
Written by Josh Taylor, Contributor

As Vodafone Hutchison Australia continues to shed customers while it rebuilds its brand, the company's CEO Bill Morrow has said that Vodafone may skip buying up waterfront spectrum in the 700MHz band for long-term evolution (LTE) networks, instead focusing on deploying LTE in the 1800MHz band.

Hutchison Telecoms Australia, 50 per cent stakeholder in Vodafone Hutchison Australia (VHA), announced yesterday afternoon that VHA lost 178,000 customers and reported a loss of AU$260.2 million for the first six month of 2012.

In what has been a disastrous 18 months for the company, following its infamous network outages in 2011, Vodafone's customer base slid below 7 million to 6.8 million, from a high of 7.5 million in 2010.

In a conference call with journalists and analysts yesterday, new CEO Morrow said the company owed an apology to its customers for the past and a commitment to not have the same issues again. Morrow noted that customer complaints to the TIO were at their lowest levels in two years, which were just fewer than two per cent. He said that he expected the company would begin to turn around its troubles in the next 12 months.

Part of that strategy is continuing investment in the network, including a planned LTE roll-out next year. Unlike his predecessor, Nigel Dews, Morrow was more reticent on whether Vodafone plans to participate in the 700MHz auction in early 2013, indicating that the company may just stick to rolling out the 1800MHz spectrum band.

"We have to weigh that against the current spectrum position we have, which is actually quite rich," Morrow said. "If you look at the depth of what we have at the 1800MHz level, we're in a far better position than any of the other two carriers and there is plenty of spectrum to use for LTE."

Although an LTE network in 700MHz spectrum will mean fewer base stations, Morrow said the company was prepared to install a few more base stations for 1800MHz, as it may ultimately end up being cheaper than forking out his estimate AU$900 million for the 700MHz spectrum.

In addition to that, he said that, given the amount of spectrum Vodafone has on offer, he predicts the company will be able to offer LTE download speeds of up to 150 megabits per second (Mbps).

"I'm pretty excited about that. That means, from a marketing perspective, we're going to have an advantage with the speed if we get the LTE picture right," he said "We have so much of the 1800[MHz] that we can deliver that without extra money, apart from the equipment deployment."

Morrow said LTE was being delivered around the world in the 1800MHz band, and 700MHz would be tougher to get devices for.

"1800[MHz] for LTE is probably the most-deployed spectrum around the planet right now; that is going to have the best economies of scale," he said.

"The 700MHz is almost a stand alone. It's not even the same spectrum that is being deployed in the United States by Verizon and AT&T."

Morrow predicted that the brand would continue to have troubles over the next 12 months, but he said it would be a "quick recovery" when the brand returned. Speculation was rife when Hutchison Telecoms Australia went into a trading halt yesterday morning, that Hutchison may seek to sell its stake in Vodafone Hutchison Australia, but Morrow said that the company remained committed to VHA.

"[They are] constantly reinforcing their commitment to this business. They care. I do think that they see Australia as an important market. I don't think about an M&A transaction for either shareholder."

The company restructured its sales and marketing department in January. Morrow said he expected further changes over the next 12 months to the company's management structure, but could not provide further details today.

"I'm constantly evaluating to ensure we have the right team in place. I'm looking for opportunities that is going to take us to the next phase of the turnaround. I suspect that there will be more changes, which will be natural and I'll leave that there."

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