Big day for Telstra yesterday, as the telco giant signaled a seachange in telecommunications with two completely unexpected acquisitions. Their mobile acquisition might be the more significant.

Click here to check out Amaysim's $40/Unlimited/4GB plan, or call 1300 302 942

Click here to check out Dodo's $40/Unlimited/5GB plan, or call 1300 136 793

Telstra’s acquisition of Adam Internet, a regional champion in South Australia with 80,000 customers, suggested that in the NBN world, Telstra will use its muscle to acquire low cost sub brands, a practice it has resisted until now (or, more accurately, a practice frowned upon by the regulators).

But with the NBN taking away Telstra’s monopoly, the shackles have come off. And Telstra seems to be using this regulatory go-ahead to strengthen its position in mobile as well.

Best Kept Secrets

There are several different profiles operating right now in the mobile space. There are three networks – Telstra, Optus and Vodafone.

Telstra’s network is ‘dense’ – several thousands of towers propogating strong signal, with many of those towers fed by fibre to boost the throughput (‘capacity’, or ‘bandwidth’) for mobile data. The number of towers means that many cells – the bubbles of radiation that emanate from each tower – overlap. That means fewer dropped calls and more stable data performance.

Optus’ network is not hugely smaller than Telstra’s, but there are larger gaps in coverage, and fewer towers have been linked with fibre, relying on more erratic microwave relay instead.

Vodafone has a smaller network overall, with poor inter-capital links. Their network has undergone a 1$bn upgrade in the last 18 months, but still lags significantly behind their rivals.

All three networks roughly use a similar model when pricing – attract customers to two year contracts with big value cap plans, and subsidize the latest and greatest handsets. But the contract cap plans specifically come laden with conditions that can cause bill shock- exclusions on 1300 numbers, complicated peak/off peak restrictions, etc. If 30% of customers get caught out, and 90% of those who get caught out call and effectively argue down their large bill, that still leaves 10% of customers paying well over what they were signed up for. That’s all gravy.

In stark contrast are the Mobile Virtual Network Operators (MVNOs). These are firms who buy airtime and data off of the networks and sell it on, mostly on SIM-only plans where the customer brings their own handset. These plans are so much better value that it almost seems unfair – Amaysim offers unlimited talk, text and 4GB of data for $39.90 a month. Dodo offers the same, but with 5GB of data and $50 international credit. TPG offers $1000 value, free text and 3GB of data for $35. Nothing the major networks offer for their own retail price sheet comes close to comparing. The potential savings, extra freedom and extra data benefits outweigh the outright cost for a new phone in a big, big way- but people don’t want to spend $700 right now on a new phone.

Optus

Optus is the major wholesaler. All the above MVNOs use the Optus Open Network. In fact, if you’re not with Vodafone or Telstra, chances are you’re on the Optus network one way or the other.

Most of the $40/Unlimited plans out there are Optus based, and Boost was no exception. Boost wasn’t even an MVNO- it was a fully licensed brand under the Optus umbrella, a license it had held on to for 12 years. Their $40/Unlimited plan includes 3GB of data.

Boost under Telstra

Until recently, Telstra refused to wholesale their superior network to anybody. When they started offering wholesale earlier this year, a handful of suppliers picked it up – most notably JB Hi-Fi. But the re-sold Telstra plans were limited to the 850MHz 3G network, with Telstra’s 4G LTE network only sold through Telstra. By contrast, Optus is allowing their 4G network on Virgin, whom they own outright, and it is expected that big MVNOs like TPG, Amaysim and iiNet will be allowed to use their 4G network before Christmas.

A Telstra spokesperson said there are no restrictions on Boost reselling Telstra's Next G offering, which is very interesting indeed. Until now, any suggestion that anyone would be able to use Telstra’s gold-plated network for $40 a month with unlimited calls and 3GB of data would have seemed absurd – at that price, the game would be over. Who wouldn’t jump on that?

But if that’s the case, why would Telstra change Boost’s pricing? They get to keep their own vaunted Mobile brand looking smart and serious, and can use the Boost brand to attract younger customers.  Those customers might be using Telstra’s normally out-of-reach network for the same price they’d normally pay to take on a ‘lesser’ connection.

OR…

Or they might not. Telstra might add in their usual restrictions and complicated pricing schemes, or require bundles with other services. That is certainly their MO in the past.

And even if they do enter the $40/Unlimited space, the game isn’t completely over. The market could shift down again. And Optus is rolling out 4G apace with Telstra. Things are getting interesting, but it all points to better value for the consumer.