2008 New Zealand - Mobile & Broadband Overview and Analysis

BuddeComm’s 2008 New Zealand - Mobile & Broadband Overview and Analysis publication provides a detailed overview, including statistics, forecasts and analysis, of the mobile, Internet, broadband, convergence and digital media and broadcasting sectors of the New Zealand telecommunications market.

The current mobile market is a duopoly of Vodafone New Zealand and Telecom Mobile. In the long term BuddeComm does not think it will be viable for more than two mobile network operators to survive in a nation as small as New Zealand, based on traditional voice and texting services. Competition can only be developed on top of these networks (MVNOs). The local mobile market is now approaching saturation and we expect overall market subscriber growth to drop to just 2.9% in 2007/08. New Zealand is finally catching up with the rest of the world in terms of broadband penetration, with overall subscriber growth in excess of 30% in 2006/07.

Only a year only ago, we would have put New Zealand two to three years behind Australia in terms of some of its broadband developments.

The bundling of voice, data and video services (triple play) and mobile services (quadruple play) are likely to develop on a more large-scale fashion in New Zealand in 2008 and 2009. Voice and data bundling has already been introduced by a number of players, including Telecom, Orcon (now part of Kordia) and ihug. These developments will be assisted by the government’s decision to proceed with the operational separation of Telecom and to introduce new services such as LLU, naked DSL, and a wider range of regulated wholesale services which should begin to be introduced into the New Zealand market by the beginning of 2008.

The FTA broadcasting networks are expected to see intense competition for viewers and advertising in 2008 and beyond, which will impact on their cost margins as they will be forced to put more money into programming and marketing.

The new environment is going to open up lots of new opportunities for everybody involved. However, it could take time before that actually starts to happen. Opportunities include the value-added infrastructure services such as data centres, content hosting, network management, etc. But equally a range of innovative customer services can be built on the new wholesale products and perhaps more importantly open networks will create a great new environment for digital media, e-health, tele-education and smart grid applications in which there will now be much wider scope for a variety of organisations to participate.

Key Highlights

• Vodafone took the number one spot in mobile subscribers in New Zealand back in 2003 and now holds 53% of the subscriber market, despite a 2% overall market share loss in 2006/07.
• With a reluctant Vodafone, MVNO networks are very slow to get of the ground.
• Overall subscriber growth was unusually high at 11.6% in 2006/07, bringing the market to a total of 4.25 million subscribers. However, we expect overall market subscriber growth to drop to just 2.9% in 2007/08 and 2.3% in 2008/09 as the market approaches saturation.
• In the long term BuddeComm does not think it will be viable for more than two mobile network operators to survive in a nation as small as New Zealand, based on traditional voice and texting services. This will require ongoing regulations.
• Mobile voice is becoming another commodity service, and there will be increasing pressure on Vodafone and Telecom to lower mobile call prices, which remain very high by international standards.
• However, there could be potential opportunity for a third operator to enter the market offering niche data services.

Mobile subscribers and annual change - 2003 - 2009

Broadband, Internet and data

• New Zealand is finally catching up with the rest of the world in terms of broadband penetration, with overall subscriber growth in excess of 30% in 2006/07. However, low broadband access speeds and high costs relative to other OECD nations, is proving to be a major stumbling block for the development of local digital media activities.
• An increase in wholesale prices will result in an increase in retail prices, which once again could set New Zealand back several years on the international broadband ladder.
• BuddeComm predicts that the data market will see lower overall revenue growth in 2007-08 of only 2.5%, but data revenue growth expected to pick up strongly in 2008-09. The data market is being strongly driven by the broadband market.
• The bundling of voice, data and video services (triple play) and mobile services (quadruple play) are likely to develop on a more large scale fashion in New Zealand in 2008 and 2009.
• A number of interesting WiMAX trials and developments have been underway in New Zealand; however, there have been ongoing delays in the finalisation of the WiMAX technology which has held back the full scale rollout of WiMAX systems both in New Zealand and overseas.
• It looks as though it wouldn’t be until early 2009 before laptops with WiMAX embedded chips would be widely available. By that time wireless broadband competition from Vodafone is set to kick-in.

Convergence, digital media and Broadcasting

• Four operators had indicated plans or intentions to undertake local loop unbundling in the New Zealand market: these include ihug, Orcon, Callplus and TelstraClear.
• However, with the announcement of the Telecom cabinetisation plan, these developments are now under very dark clouds indeed.
• The introduction of ADSL2+ services, facilitated by LLU will allow for faster access of bundled services including VoIP and IPTV, this faster access will also be critical for the growth of digital media services.
• Even with full LLU, operating margins are likely to be tight, requiring diversity of services to be profitable.
• Local IPTV activity is gradually developing under the radar screen; however, a current stumbling block however is the quality of Telecom’s infrastructure.
• The FTA broadcasting networks are expected to see intense competition for viewers and advertising in 2008 and beyond, which will impact on their cost margins as they will be forced to put more money into programming and marketing.
• New Zealand audiences have increasing choice and control over when, where and how they consume media. These choices have been facilitated by the rise of technologies such as digital media players (iPods and MP3 players), digital personal video recorders, and video and audio downloads using computers connected to the Internet via broadband.

Data in this report is the latest available at the time of preparation and may not be for the current year.