New World Development

Merger to widen Telstra's Asia reach

PUBLISHED : Saturday, 01 April, 2006, 12:00am
UPDATED : Saturday, 01 April, 2006, 12:00am

Telstra Corp expects the merger of CSL and New World Mobility will help the Australian carrier expand its Asian business, but the company stopped short of giving specific growth projections or plans.

With the tie-up between CSL and New World Mobility finalised, the combined company now commands 34 per cent of the saturated Hong Kong market, which has more than eight million mobile phone users.

Opportunities for growth are limited and rivals are pairing off with mainland carriers. Chief executive Sol Trujillo yesterday said he believed Hong Kong was a 'gateway' to the larger Asian market, although he refused to be drawn on specific plans.

'I think that Telstra should be one of the big players in the business. I expect Telstra to be an even bigger player in this part of the world,' Mr Trujillo said.

'I do see this venture as enhancing our strategic options. You don't talk about these things until you are ready to discuss them.'

In addition to CSL, Telstra's other key presence in the region includes a stake in undersea cable carrier Reach.

Mr Trujillo said he expected the mobile and undersea cable businesses to 'grow aggressively'. 'Everybody is growing at double-digit rates, and we expect to grow with them,' he said.

The merger of the mobile operators into CSL New World Mobility will produce up to A$400 million ($2.2 billion) in cost savings, Mr Trujillo said. Efficiencies would come from combining network operations, retail presence, staff and other areas.

Also, the larger entity, when combined with Telstra mobile operations in Australia, would have greater influence dealing with equipment and handset vendors such as Nokia and Samsung.

'When they see an even bigger company with an even bigger footprint, it makes a lot of difference,' Mr Trujillo said.

CSL chief executive Hubert Ng said the company would continue to focus on three key markets: corporate clients with the 1010 brand; the youth segment with the 123 brand; and cost-sensitive and pre-paid customers under the New World Mobility brand.

He dismissed notions that a commitment to pay out 60 per cent of earnings to shareholders would leave the company little to invest in 3G services. 'When we see more demand, we'll roll out more capacity,' Mr Ng said.

The next step for the operator is an upgrade to high-speed downlink packet access (HSDPA), which will supercharge 3G access and offer download speeds of up to 3.6 megabits per second in the initial phases. Mr Trujillo noted Telstra would introduce HSDPA by the end of the year, with another boost to 14 megabits per second to follow within six to eight months. CSL New World Mobility would benefit from Telstra's deployment experience, he said.