Vodafone sharpens its 4G appeal

Vodafone Australia has sent a timely reminder to its rivals Telstra and Optus that it’s still a viable player in the evolving 4G race in Australia.

As Vodafone looks to shed the legacy of its network collapse, the operator is seemingly edging closer to a position where it can assert its presence and start maximising its assets, notably spectrum.

Refarming the 850 MHZ spectrum was always on the cards for Vodafone the question was when. Having opted to steer clear of the spectrum auction, concluded in May last year, Vodafone had to leverage its 850 MHz holding to keep pace with its rivals once the customer bleed had been staunched.

Vodafone is still losing customers. For the six months ending June 30, it lost 137,000 active customers, but it’s a whole lot better than the 551,000 customers it waved goodbye to during the same period last year.

For Vodafone, the decision to press go on the spectrum heavily hinged on the customer-capacity dynamic, and the decision to refarm the 850 MHz spectrum would indicate that it feels it’s getting closer to achieving a certain equilibrium.

Another likely driver for the announcement is the fact that both Telstra and Optus have managed to get early access to the 700MHz spectrum to bolster their 4G offering.

Earlier this month, Optus managed to get early access to the 700MHz spectrum when the Australian Communications and Media Authority (ACMA) gave the operator the green light to turn on its first commercial 4G 700MHz pilot in the Darwin and Perth CBDs.

Meanwhile, Telstra is set to conduct trials using 20MHz of the 700MHz spectrum band at six locations, ahead of rolling out more 4G 700MHz services in a range of cities and regional centres from January 2015 when the 700MHz spectrum becomes nationally available for commercial use.

By refarming its existing 850MHz spectrum and creating a 4G coverage layer to complement its existing high-band 4G network, which uses the 1800MHz spectrum band, Vodafone engineers an immediate 4G advantage in the metro areas.

However, independent telco analyst Chris Coughlan says that Vodafone will eventually have to put its hand up for 700 MHz at some point, to address the gap in its rural/regional coverage.

“Vodafone was one of the most spectrum rich operators out there, but they will still need to dip into the 700MHz at the next auction,” Coughlan says.

Provided the reserve price for the spectrum remains at the $1.36 per MHz mark, and it’s unlikely to go lower, then Vodafone will have to fork out a similar stash of cash as its rivals.

But for now, Vodafone’s latest decision is another step in the right direction for the operator and the 850 MHz spectrum brings with an additional advantage.

Most 4G devices in the market, including Apple’s popular Apple iPhones and iPads, are already designed to work on 850MHz and that means an instant benefit for Vodafone customers.

Meanwhile, Telstra and Optus currently offer a limited range of 4G devices that are compatible with the new 700MHz spectrum, including the HTC One M8 and the Samsung Galaxy S5, as well as one 4G advanced mobile broadband device.

But neither will lose too much sleep over Vodafone’s compelling pitch, while it does provide a short-term advantage, it’s unlikely to become a major factor as the 4G race plays out and more 700MHz compatible devices come into play.