Mobile phone market heats up

The launch of New Zealand's third mobile phone network could spark a price war with rivals Vodafone and Telecom.

The heavyweight telecommunications firms have been accused of charging extortionate mobile prices for years.

Mobile start-up 2degrees officially launched its network yesterday which will be available to 97 per cent of the population.

It has slashed pre-pay prices by 50 per cent for calls and texts to anyone in New Zealand, cutting calls from 89 cents to 44c a minute and text prices from 20c to 9c each.

Telecommunications Users Association chief executive Ernie Newman said 2degrees prices were "game changing" and would force competitors Vodafone and Telecom to drop prices.

"They underline what we and many others have been saying for many years that prices of texting and cellphone calls have been much higher than they should be."

However, he did not expect Vodafone and Telecom to drop prices dramatically or suddenly.

Telco financial analyst Geoff Zame said whether Telecom and Vodafone responded to 2degrees pricing would depend on how much support it got in the marketplace. If 2degrees grabbed 4 per cent to 6 per cent of the market, the big telco firms would match the pricing.

Initially, 2degrees phones will be sold in Woolworths, Foodtown and Countdown supermarkets.

A wider range of 6300 locations, including New World supermarkets, petrol stations and convenience stores will sell "top-ups".

The 2degrees launch will have the biggest impact on Vodafone because 75 per cent of its customers are on pre-pay, compared with Telecom's pre-pay customers, which make up 63 per cent of total customers.

Vodafone spokesman Paul Brislen said he was confident customers would stay on its network.

The company would not drop prices, he said.

Telecom spokesman Nick Brown said though 2degrees' headline calling rate appeared competitive, the text offering wasn't as competitive.

"A range of handsets and retail store capability are all important factors."