Australia's Optus to expand 3G mobile network

MELBOURNE, Jan 30 (Reuters) Australia's second-largest phone company, Optus, said on Tuesday it will spend up to A0 million (5 million) to expand its 3G mobile network to compete with dominant telco Telstra Corp Ltd. outside major cities.

The expanded system would be able to reach 96 percent of Australia's over 20 million people, Optus Chief Executive Paul O'Sullivan told a briefing. Construction on the first phase of the build-out will begin in April with coverage likely to start later this year or early in 2008.

O'Sullivan said the expansion will help to level the playing field with Telstra, which he said had an ''unnaturally high'' market share outside of major cities.

Optus, which is owned by Singapore Telecommunications Ltd.

, has a 33 percent share of the national market in Australia's main cities.

''It's a significant move and a worthwhile one,'' said Intersuisse research manager Peter Russell.

''In Asia, SingTel has been building its mobile activities very strongly, and it's doing a great deal across several countries. I think this is part of that drive.'' The cost of the expansion will depend on the technology used, Optus said, adding trials of the new 900 MHz frequency were ''encouraging''.

''The cost of the network rollout is estimated at up to 0 million if it is built entirely at 2100 MHz, and around 0 million if 900 MHz proved feasible,'' O'Sullivan said.

It would decide on the frequency to be used later this year. 2100 MHz is the global standard for 3G and is used in the vast majority of networks. Handsets in Australia do not work with the newer 900 MHz technology, but handsets will become available later this year or in early 2008.

O'Sullivan said the expansion will be funded out of Optus's normal annual capex programme over the three-year build-out. He said the project will enable Optus to make fresh inroads into Telstra's monopoly in rural and regional Australia.

ABN AMRO analyst Ian Martin said the plan would give Optus a greater advantage over its smaller mobile competitors Hutchison and Vodafone , but the company was still ''a long way behind'' Telstra.

''It's a longer-term catch-up strategy,'' he said.

O'Sullivan said the expansion will not affect the company's existing 3G network joint venture with Vodafone in metropolitan areas.

He declined to comment on speculation Optus was interested in taking an equity stake in junior telecom PowerTel .

PowerTel on Tuesday postponed a shareholders' meeting to give it more time to consider non-binding approaches from unnamed suitors.

Newspaper reports have said PowerTel was looking to head off possible takeover interest from Optus. Telecom Corp. of New Zealand has also said it was considering closer ties with Powertel.

REUTERS PV RAI1118