Telecom and Vodafone in bidding war

TOM PULLAR-STRECKER
Last updated 12:21 02/12/2013

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Telecom and Vodafone are locked in a bidding war for the last remaining block of "digital dividend" radio spectrum, with analysts forecasting the winner may have to fork out $50 million or more.

The auction started on Tuesday [November 26] with a minimum reserve of $22m and "no news is good news" for the Crown's coffers.

The Business, Innovation and Employment Ministry isn't providing updates, but Telecom and Vodafone have been increasing their bids in $1m increments and it is understood there have been three rounds of bidding each day.

That means the price of the ninth block should have reached $33m as the auction heads into its second week. A ministry spokeswoman said it would not be releasing additional information about the auction until it concluded.

Telecom and Vodafone both acquired three 10 megahertz blocks of spectrum at an earlier auction in October, while 2degrees acquired two blocks.

There was no competition at that auction because the three companies were each capped at bidding for three of the nine available blocks. That meant the blocks all sold immediately at their minimum $22m reserve, raising $176m for the Crown.

The spectrum is best-suited to supporting 4G broadband services in more sparsely-populated parts of the country.

Deutsche Bank analyst Arie Dekker said he wouldn't be surprised if the last remaining block fetched $50m, given the advantage it would provide the winning party. "I think it is going to be quite keenly contested."

Forsyth Barr analyst Blair Galpin also believed a price of $50m to $60m was possible.

He noted that under the terms of the government-run auction, the winner would also need to build extra infrastructure in rural areas.

"It is not just the cost of the spectrum, it is the other costs they will incur too," he said.

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- © Fairfax NZ News

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