Telecom outbids Vodafone for spectrum

TOM PULLAR-STRECKER
Last updated 14:58 22/01/2014

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Telecom has outbid Vodafone for the last 10MHz "digital dividend" spectrum block, agreeing to pay $83 million for the resource.

The auction result means Telecom will have 18-year rights to 40MHz of the spectrum, which is best-suited to support 4G mobile networks in rural areas, while Vodafone will have 30MHz and 2degrees 20MHz.

The more spectrum a carrier has, the more mobile broadband customers it can support at higher speeds and with higher data caps.

But the price Telecom has paid for the spectrum is likely to be closely scrutinised by analysts and investors. Telecom shares were up 1.5 cents at $2.40 shortly after the announcement.

Vodafone had been considered by some to be the front-runner to buy the final spectrum block, both because it is the largest mobile carrier and has a deal with the Government under the Rural Broadband Initiative that obliges it to offer a fixed-wireless broadband service to many rural homes and businesses. That service is expected to be upgraded to 4G technology.

However, Telecom has traditionally been strong in the rural market and has proved unwilling to relinquish any advantage to its rival.

The Commerce Commission has yet to approve Telecom acquiring the spectrum block. It is due to make a ruling by February 14. 2degrees has appealed for it not to approve the sale.

The three telcos paid the minimum reserve price of $22m per-block for each of the eight 10MHz blocks that were auctioned by the Government late last year, meaning the Crown has so far raised $259m for the radio resource, which has been freed up by the closure of analogue television.

They will next bid to pay extra to get the particular blocks within the 700MHz spectrum band that they prefer.

Vodafone network head Tony Baird said the spectrum was an important resource but there was "always a trade-off" between paying for spectrum and other network investment.

"With Telecom's comparatively low cell site site count - some 15 to 20 per cent less than Vodafone - we always suspected that it would value the [ninth] block of 700MHz spectrum more highly than Vodafone," he said.

Telecom chief executive Simon Moutter said the extra spectrum would provide significant benefits to customers.

"This puts Telecom in the best position in the market to deliver a very high-performance 4G mobile network for New Zealand, including in less-densely populated areas," he said.

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- Fairfax Media

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