Alcatel-Lucent set aside $15 million during the 2010 financial year for “additional provisions”, according to its financial statements for the year, which were filed with the Companies Office earlier this month.
Telecom have posted a notice alerting customers to issues with the voice service on its XT mobile network,
Mobile data is on the ascendancy with demand being driven by consumer devices such as the iPad, which one Wall Street analyst predicts will reach sales of 28 million by the end of this year. Meanwhile, Apple’s competitors are set to roll out their own tablets, with many unveiled at the Consumer Electronics Show in Las Vegas in January.
Telecom mobile customers who have yet to make the switch to XT are unable to make or receive calls and texts from today when travelling in Australia and other countries that do not have CDMA networks.
The company last night turned off its ''WorldMode'' service, which let owners of some more expensive CDMA mobiles roam overseas on networks based on alternative mobile technology GSM, using a Sim card.
The dual-mode phones were introduced in 2006 as a stop-gap measure ahead of the launch of Telecom's XT mobile network in June last year.
Telecom spokeswoman Emma-Kate Greer said all but 3 percent of customers who used their mobile overseas had switched to XT.
Telecom had phoned and sent postcards to WorldMode customers to ensure they were not caught unawares, she said.
''In the past week, we have sent reminder messages to all customers currently roaming with the contact details for our roaming helpdesk for them to contact us. A further text message was sent [on Tuesday] to all roaming customers again to remind them of the cut off date.''
Telecom will axe its 3G CDMA mobile broadband service at the end of next month, meaning non-XT customers will notice a speed drop when using Telecom phones and datasticks to access the internet or download emails.
It plans to close its CDMA network completely in 2012.
2degrees chief executive Eric Hertz has forecast the changes will create an opportunity for rival network operators to pick up customers, given that not all remaining CDMA customers may switch to XT.
Telecom met its earnings forecast for the year thanks to a compensation payment from an unnamed supplier, which masked an otherwise weak result.
The company posted an annual profit of $382 million, beating analysts' expectations by about $10 million to $20 million, but only after a $27 million gain from "resolutions and settlements" with the supplier.
There is likely to be speculation the payments were made by Alcatel-Lucent, and are compensation for problems with Telecom's XT network, which Alcatel-Lucent built.
In its annual results for the year to December 31 2009, filed last month, Alcatel-Lucent NZ noted that there had been compensation payments relating to "claims by a customer" about "components of a network supplied by Alcatel-Lucent New Zealand." These weren't expected to have a material effect on the New Zealand subsidiary's financial results, the filing noted.
Alcatel-Lucent's results also noted that the compensation claim was made on a no admission of liability basis.
Analysts had been expecting the latest Telecom results to show a profit of between $360 million and $370 million. The profit was 4.5 per cent down on last year's $400 million.
Telecom's share price slipped 3 cents to $2.07 in early trading.
Revenue fell 6.3 per cent to $5.27 billion, but Telecom's costs fell faster.
That meant earnings before interest, tax, depreciation and amortisation were down only 0.2 per cent at $1.76 billion, which chief executive Paul Reynolds said was a "great accomplishment".
The company had "halted the significant earnings decline of the previous two years," he said.
Telecom's mobile revenues increased less than half a per cent over the year to $826 million, despite the launch in May last year of its $574 million XT network.
Mr Reynolds said the growth rate had been affected by compensation payments made to XT customers, without which mobile revenues would have been up 4.5 per cent.
The number of customers on its XT network rose by 20 per cent to 712,000 over the three months to the end of June as customers switched across from its CDMA network which is due to be turned off in 2012.
Mr Reynolds said the market for broadband was "reaching saturation" with about 60 per cent of homes now on broadband, but it still saw some room for growth.
The company hopes to win a contract to partner with the Government in laying fibre-optic cable to three-quarters of homes and businesses.
Government investment vehicle Crown Fibre Holdings is due to make a recommendation in October on who the Government should partner with.
- Additional reporting by David Watson
Compensation payouts to Telecom by Alcatel-Lucent in the wake of the XT network issues earlier this year aren’t expected to have a material effect on Alcatel-Lucent’s financial results, according to Alcatel-Lucent.
Telecom will ask for a second chance for its beleaguered XT network with an advertising blitz starting tonight after angering mobile customers.
The campaign will offer customers a "money-back guarantee" when they join the network. However, Telecom will not cut prices to match rivals, including newcomer 2degrees.
It is understood Telecom's new deal will let customers who sign up to an eligible plan return their phone within 30 days if they are not satisfied — with a refund for the machine and any calls made.
The new TV commercials will not include celebrities, unlike the adverts featuring Top Gear co-star Richard Hammond that launched XT a year ago. Instead, a senior Telecom staff member will appear in front of the camera.
Spokesman Nick Brown said its recent marketing activity had been restricted to direct communications to customers and online or retail channels. "You can expect to see more marketing coming through other media channels soon."
Telecom chief executive Paul Reynolds said last month that XT was now providing a "bloody good service" and the time was right to start marketing it again. Almost three-quarters of Telecom mobile customers remain on its CDMA network, which the company intends to switch off in 2012.
Temporary discounts offered to XT customers by Telecom in February were withdrawn last week. They were offered in the wake of four network failures that sapped customer confidence.
Industry sources estimated that up to 20,000 customers deserted Telecom for Vodafone in the months following the XT failures. District health boards, including Capital and Coast, publicly considered cancelling their contracts with Telecom.
Telecom has since spent tens of millions of dollars improving the resilience and coverage of XT by modifying software that appears to have been partially responsible for the faults.
Pressure for permanent price cuts has grown during the pit stop. Last month, Vodafone launched a new prepay plan to match 2degrees' standard 49-cent call charges.
But Telecom appears intent on trying to hold back the tide a little longer. Mr Reynolds told analysts in Sydney last week he was quite surprised by price cuts imposed by Vodafone in response to 2degrees' market entry. "There's a little bit of jitteriness — price jitteriness — in the mobile market in New Zealand that we hope will settle down."
Chief financial officer Russ Houlden said Telecom aimed to increase its share of the $2 billion mobile market — now believed to stand at 39 per cent — to 43 per cent by 2013.
Customers using XT to access the internet could expect average download speeds of 4 megabits per second, after an upgrade this year to HSPA+ technology. There were very few places in the world you could do that, Mr Reynolds said.
Issues with Telecom’s XT network led open source PBX provider Vadacom to develop an iPhone application that enables businesses to manage their corporate PABX extension via the device.
The Commerce Commission won't haul Telecom over the coals for saying that its XT network reached 97 per cent of the population, a claim the company withdrew after finding coverage fell short of expectations.
Telecom is adding another 55 cellsites and installing tower-mounted amplifiers — hi-tech hearing-aids — on 420 of its existing cellsites to improve the reach of the network.
A review by British firm Analysys Mason that was released this month said XT was supposed to provide coverage in at least as many places as the CDMA network that it was designed to replace, but didn't.
The commission's fair trading team looked into Telecom's 97 per cent coverage claim, but found there did not appear to be a breach of the Fair Trading Act, a commission spokeswoman said.
"The commission is not proposing to undertake a full investigation at this stage."
Cellphones can now be used on a smattering of flights to and from New Zealand for the first time.
Telecom XT post-paid customers can use their mobiles on all Emirates planes and some Air Malaysia flights, including flights between Auckland and Brisbane, Melbourne and Kuala Lumpur and between Christchurch and Sydney, under a deal with the airlines.
Calls cost $13 a minute with a $1 a minute charge for incoming calls and an 80 cent charge for text messages.
Accessing the internet costs $40 a megabyte.
Passengers are billed by Telecom, rather than the airlines.
Coverage is provided by Norwegian-owned company AeroMobile.
It has installed mini cellsites on Emirates and Air Malaysia planes that connect to terrestrial networks via satellite.
Emirates became the first airline to commit to supporting mobiles on its entire fleet in 2006, when it agreed to invest US$27 million in the required equipment.
Having cellsites on the planes means phones can operate at a low power setting, which is designed to mitigate any safety concerns about interference with aircraft navigation systems.
However, mobiles are still banned when planes are flying under 6000 metres.
Telecom spokeswoman Lori Belmonte expected the service would appeal to business people.
"It will allow our customers to quickly check emails or make a few quick calls – it's just another way for them to stay in touch while travelling."
Air New Zealand has not announced any plans to allow mobiles to be used in planes or to provide any form of on-board internet access.
The airline did a survey of passengers in 2006.
Although Air New Zealand has never shared the results, it is believed they showed opposition to the use of cellphones.
Spokeswoman Tracy Mills says it "continues to keep a close watch on developments".
Good lord
Telecom and its infrastructure provider Alcatel-Lucent have got to the bottom of the causes of the four major problems in the early days of the XT network, members of TUANZ were assured at a meeting last Tuesday.
A switch fault today saw thousands of Telecom customers in Blenheim unable to make phone calls from their landlines. The fault struck at 2.40 pm, with the a switch being lost.
The government will get oversight of an independent review into the Telecom XT mobile network failures.
The recent failure of the 111 emergency service — no, not for the new XT 3G mobile network, but for Telecom’s landlines in Auckland and Northland — drew attention to the fact that the incumbent operates the Public Switched Telephone Network (PSTN) on equipment that was installed in the early 1980s.