The founder and joint managing director of Australia’s fourth-largest telco One.Tel, Jodee Rich, has revealed more of the company’s plans to become a major player in the competitive European mobile phone market.
With full backing from its two major shareholders, top Australian media conglomerates Rupert Murdoch’s News Corp and Kerry Packer’s Publishing and Broadcasting, and in partnership with Lucent Technologies, One.Tel wants to build a major third generation mobile network in Europe at a cost of up to A$30bn ($19bn).
The total spend for the network will be between $10bn and $20bn over the next 10 years, and we expect to initially spend up to $2bn in acquiring spectrum, Rich said.
The plan will pit One.Tel against Europe’s top operators such as British Telecom, Vodafone AirTouch, Deutsche Telekom and France Telecom.
The digital network will be built by Lucent, the world’s largest phone equipment manufacturer, under a vendor-finance agreement which allows One.Tel to pay Lucent back as it generates revenue from customers. But Lucent officials were not prepared to comment on whether the US multinational would fund One.Tel for the full cost of the European network.
Analysts speculated Lucent will require One.Tel to meet key hurdle rates and make hefty interest repayments in order to pay for the upfront costs of building the network. The arrangement will certainly take a major chunk out of One.Tel’s cash flow for many years to come and Rich said his company and Lucent will be joined at the hip for 10 to 15 years.
Despite the backing it has, some Australian industry analysts expressed doubt One.Tel would even be able to raise the initial $2bn it will need to bid for radio spectrum. It has A$550m in cash reserves and credit lines, and can raise another A$380 million through the conversion of options. It also plans to raise several hundred million dollars by floating its 500,000-customer international business on the London Stock Exchange next year.
Others were more bullish on its prospects and one pointed out that another little known outsider, Hong Kong conglomerate Hutchison Whampoa, moved into the UK and established the successful Orange network, capturing business from BT and Vodafone.
Rich said he expected to win the rights to set up networks in two or three European countries, but is initially focusing on the UK where mobile licenses are expected to be sold in February for up to A$1.2 billion each, and where News Corp has a sizable interest in newspapers and pay-television.
News Corp would like to be a very key player in the wireless world just as One.Tel would, Rich said. We would very much like to take News Corp content down the phone. Rich, Lucent’s head of wireless and Rupert Murdoch met in the US last week to discuss the media capability of third-generation mobile devices, he said.Although institutions have largely stayed away, small investors have reacted so favorably to One.Tel’s recent initiatives that it is now ranked among Australia’s top-40 companies in terms of market capitalisation despite earning just A$9m last year, and having a cash outflow of A$29m. It is trading on a price-earnings ratio of 425 times, compared with 32 times for market-leader Telstra Corp.
