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Fierce competition between Australia’s main mobile operators has seen the country become one of the world’s largest HSPA markets. By end of second-quarter 2008, Australia had a combined 4.2 million HSPA connections making it the world’s third-largest HSPA market, trailing only the US and South Korea. By our calculations, combined WCDMA and HSPA connections accounted for just over 42% of all Australian connections by Q2 and high-speed connections are now taking significant growth out of GSM, which declined by over 19% over the year.
 
Market-leader Telstra switched on its HSPA-enabled network – known as ‘Next G’ – in October 2006, making it one of the first operators in the world to do so on a nationwide basis. Next G provides high-speed services in the 850 MHz band; a factor that has allowed it to more efficiently expand the network into some of Australia’s hard-to-reach rural areas. The operator now claims to have achieved 99% population coverage and the network was deemed sufficiently developed that Telstra was allowed to switch off its older CDMA-based network earlier this year, saving it the expense of running two networks simultaneously.
 
Since then, Telstra has announced a number of significant developments relating to Next G, including launching a prepaid version of its wireless broadband product and, this month, announcing it would become one of the world’s first operators to launch ‘Enhanced HSPA’ (also known as ‘HSPA Evolved’ or ‘HSPA+’). Telstra claims first deployments of the technology, set for year-end, will increase peak download network speeds to as much as 21 Mb/s, from a maximum of around 14.4 Mb/s currently. 
 
Telstra’s closest rival, Optus, is not far behind. The SingTel-owned operator announced in May it would build-out its HSPA-enabled network to reach 98 percent population coverage by next year (a claim ridiculed by Telstra in a recent press release) and offer speeds as fast as 42 Mb/s by mid-2010. Third-placed Vodafone Australia said earlier in the year that it was targeting rolling-out HSPA to 95 percent of the population by year-end, though recent problems attributed to its network supplier, Ericsson, has seen this deadline pushed back.
 
For its fiscal-year 2008 – which closed at the end of Q2 – Telstra reported that mobile service revenue grew by 12.3% over the previous year to A$6.4 billion [US$4.5 billion], with non-SMS data services accounting for 57.1% of this growth. Voice revenues grew just 1.4% (to A$2.7 billion) but mobile data revenues grew 44.1% to A$1.5 billion with non-SMS revenues contributing 52.1% of data revenues. Telstra first revealed in November 2007 that non-SMS services had begun accounting for more than half of all data revenue. However, while Telstra points to the success of its mobile content services – via its ‘Big Pond’ branded mobile portal – its number of mobile broadband connections remains relatively low. According to the operator, mobile broadband customers (defined as datacards and USB dongles) reached 588,000 by the end of the quarter. This was a rise of 124,000 during the second-half of Telstra’s fiscal year, but accounted for only a fraction of its HSPA connections by end of Q2.
 
As Telstra’s recent introduction of prepaid mobile broadband tariffs demonstrates, this market is becoming a key battleground for the Australian operators. The market for HSPA devices is already highly competitive. Apple’s iPhone 3G, for example, is offered by every mobile operator in Australia apart from Hutchison. Further competition arrived in the shape of Virgin Mobile Australia, an MVNO on Optus’ network, which recently announced it would become the world’s first MVNO to offer the device, and undercut the existing network operators on price. Telstra, which lists 29 handsets as being compatible with its Next G network, is also set to offer the BlackBerry Bold, the first HSPA-compatible BlackBerry.

Will Croft, Analyst, Wireless Intelligence

Mobile broadband accounted for 14% of Telstra’s HSPA connections and 17% of its HSPA net additions in the second quarter but take-up remains slow. This is likely due to the conservative pricing of its various tariffs; Telstra’s mobile broadband works out nearly twice as expensive as rival offerings. Hutchison, Optus and Vodafone all offer 5 to 6 GB of usage for A$40 – A$50 while Telstra’s A$59 per month deal offers only 1 GB – a deal available on Vodafone for just A$20 per month. All Australia’s operators have sought to lower mobile broadband prices and raise usage limits as competition in the market has increased. But with many more HSPA subscribers than its rivals, impressive coverage and a first-to-market advantage, Telstra is still leading the way in migrating Australian subscribers onto the new high-speed networks. At the current pace of migration, we forecast that combined WCDMA and HSPA connections in Australia will overtake GSM during the first half of 2009.