Supreme Court stymies Telstra's bid for control of Telstra/Hutchison shared 3G network

Stuart Corner
Wednesday, 27 May 2009 13:53

IT Industry - Strategy

Telstra's bid to exploit the proposed merger between Vodafone Australia and Hutchison Australia to gain greater control over the 3G network it shares with Hutchison has been thwarted by the Victorian Supreme Court.

The network assets are owned by a 50:50 joint company, 3GIS, under an agreement announced in December 2004. Telstra argued that the proposed merger represented a change of control of Hutchison 3G Australia and that this changed the terms of the 3GIS agreement.

Exactly what these changes would have been has not been made public, but Hutchison CEO, Nigel Dews, said that, had the court upheld Telstra's claim, Telstra would have had "a greater say in the operations of 3GIS." He added "I am pleased, but not surprised to see the matter has been resolved in our favour. Telstra made an untenable claim...I hope that under the new management team, this kind of approach by Telstra is a thing of the past."

The board of 3GIS is made up of three representatives from each partner and the board appoints one of its number as chair for one year, with the chair coming from each company on alternate years. According to reports of the court case, it emerged in court that the chair does not normally have a casting vote, which means that no partner can overrule the other. However if there is a change of control of one partner the other can appoint the chair and give him/her the casting vote. There is a technical committee similarly constituted.

Hutchison had the first 3G network in Australia and when the agreement was announced had 2000 base stations in Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth. By the time the agreement came into effect on 1 July 2005 coverage had been expanded to Canberra and the network reached 50 percent of the population.

Telstra paid $450m for half of this network and estimated it gained a two year lead on Vodafone and Optus. However a few months later new Telstra CEO, Sol Trujillo, announced plans to build the 850MHz Next G network, greatly extending and overlapping the coverage of the 2100MHZ 3GIS network.