Will they or won’t they?

Not even Telus knows for sure…

Rumors have been circulating for months that Canadian iDEN and CDMA network operator Telus is pondering the buildout of an overlay GSM network as well as a migration to LTE. It’s clear that the operator is giving the idea some thought, but no decisions have yet been made.

Rogers is currently the only Canadian operator using GSM, allowing it to get its hands on a lot of trendy devices that hit the GSM market before the CDMA market. That, in turn, is helping Rogers maintain its dominant market share. According to Informa Telecoms & Media, Rogers had 36.65 per cent market share at end-2007, while the Bell Wireless Affiliates had 31.05 per cent and Telus 27.81 per cent. In addition, Rogers is banking nearly US$500 million in GSM roaming fees each year.

One suggestion, which might be considered crazy by some or innovative by others, has been for Telus to get in on the roaming action by whipping up a single-event GSM network that would operate in Vancouver during the 2010 Winter Olympics, giving the operator some quick incoming roaming revenues that it could use to fund a further GSM buildout in major markets nationwide.

Telus’ management has been refreshingly candid about the choices before it. During the company’s 4Q07 earnings conference call, President and CEO Darren Entwistle addressed the speculation regarding GSM.

“Clearly, it’s always incumbent upon us, whether it’s our wireless business or wireline, to stay abreast of the developing ecosystems from a technology perspective in the telecoms world,” he said.

Entwistle discussed the philosophy behind Telus’ technology decision making. He noted that, on the one hand, a company must be wary of squandering its previous technology investments by moving prematurely toward a new technology, but, on the other hand, a company must also ensure it doesn’t become uncompetitive by waiting too long to undertake a necessary switch.

Citing Telus’ deployments of EV-DO Revision A, “I think it’s incumbent upon us right now to say we have technology leadership from a bandwidth perspective within the wireless world that’s good for consumer data applications and good for business data applications. And we need to sweat the heck out of this technology stage to get the ROI that we want on the EV-DO and EV-DO Rev. A investment in the first place,” said Entwistle. “It’s interesting to note that right now, if you compare us to alternative technologies in Canada, we do have a leadership position. From a speed perspective, we have the fastest network both on the downlink and on the uplink paths, and we should be exploiting that.”

In late February at the CIBC World Markets Institutional Investor Conference, Bob McFarlane, Telus’ CFO, also gave kudos to the operator’s CDMA network though he noted its broadband superiority will be fleeting as Rogers expands deployment of HSPA across Canada. “We certainly have been advantaged to date on CDMA in terms of capacity, efficiency, ROI, EVDO, Rev-A, data speeds, all that sort of thing. I think it’s also fair to say, through HSPA, that advantage is going to be negated or offset.”

McFarlane noted that the idea of a single operator building a new 1900MHz GSM network across 29 million Canadian POPs, many of which are in rural areas, is farfetched. However, he indicated that Telus might be open to a GSM overlay if it gets a partner to help. That partner would likely be Bell Canada, with which Telus already shares a number of cell sites. But Bell is in the midst of a leveraged buyout by private equity interests and not in a position at present to be making radical technology shifts.

If Telus opts to join the GSM camp, it, as well as any partner operator, will need to consider whether to also migrate to WCDMA/ HSPA, which in turn raises questions about potential deployments of HSPA+ and LTE.

Even if Telus doesn’t make the switch to GSM, that doesn’t rule out an eventual migration to LTE rather than the CDMA camp’s UMB technology. In fact, Telus appears to be leaning in the direction of US CDMA operator Verizon Wireless, whose parents, Verizon Communications and Vodafone Group, have committed it to LTE. “It’s no longer the case that if you’re on CDMA or on GSM, you’re going to permanently end up on a different upgrade path. OK, they’re eventually going to converge,” said McFarlane.

He noted that if LTE is not available till 2011, or more likely 2012, operators will need to consider what to do in the interim in order to stay competitive. Apparently Telus does not see WiMAX as an option. “Our view is that WiMAX in the Western countries, where you’ve got cellular deployed, etc., … is not going to be 4G in a substantive sense,” said McFarlane.

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