XT fizzer spurs Telecom to try another number

Telecom Retail, effectively the Telecom brand, is understood to be planning a major brand relaunch before Christmas, Craigs Investment Partners broker Chris Timms says.

The relaunch would complement Telecom's other operationally separate business units - Chorus (network), Gen-i (business) and wholesale.

Telecom's XT network advertising campaign, featuring Richard Hammond, recently won Fair Go's "raspberry award", suggesting initial XT excitement might have fizzled, Mr Timms said.

"The campaign had `blokey' appeal and is likely to have resonated with corporates and wealth-rich guys, which is odd, given the demographic Telecom needed to target was the Auckland youth and small and medium enterprise [SMEs] market in Auckland, where Vodafone is dominant."

The Telecom Retail brand re-launch could put the "unfortunate Top Gear experiment" behind it, he said.

Craigs understood that third mobile entrant 2 Degrees, which won the award for best commercial, had secured more than 100,000 connections since its launch.

The launch included a drop of 50,000 free SIM cards but Mr Timms thought those were active connections rather than SIMs with the $10 credit that had not been used, Mr Timms said.

"The early success partly reflects clever branding with its advertising campaign which involves humour and projects a brand personality."

Porting data between networks suggested the majority of connections had been at the expense of Vodafone rather than XT, which was expected, given the demographic and the ability to swap SIMs.

However, the issue for 2 Degrees was that a large proportion of connections were outside its network coverage area of Auckland, Wellington and Christchurch.

Cell-site deployment might be accelerated in some areas to reduce roaming charges to Vodafone.

The other issue would be ensuring customers topped up, Mr Timms said.

Telecom said XT had more than 200,000 connections at the end of September.

Given there were 165,000 on August 14, it suggested momentum might have slowed.

Craigs remained concerned that mobile cost of sales - the single most controllable cost in a telco - might have been wound back to meet the profit target, he said.

That was an old trick but one not in the best long-term interests of Telecom's aspirations to attack Vodafone, claw back market share and achieve sustainable revenue growth.

"We suspect XT has made some ground in the corporate segment via Gen-i sales channels but very "little ground in consumer and SMEs.

"Although revenue is roughly equal across these three segments, the majority of the mobile profit pool is in consumer and SMEs," Mr Timms said.

 

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