Telecom wins spectrum block
The Government's decision to isolate the last block of "digital dividend" radio spectrum from 2degrees' holdings appears to have tipped the sale to Telecom.
But the door has been left open for 2degrees to pool its 700 megahertz spectrum with Vodafone.
The Commerce Commission this morning gave Telecom permission to buy a fourth 10 megahertz block of "digital dividend" radio spectrum for $83 million after a series of delays by the competition watchdog.
The purchase from the Crown means Telecom will own twice as much of the spectrum as 2degrees and a third more than Vodafone, potentially putting it at an advantage in the rural mobile broadband market. However, a combined Vodafone-2degrees allocation would be bigger than Telecom's.
Telecom outbid Vodafone for the last of the nine blocks of spectrum in January, after 2degrees passed on the opportunity to buy it for a $22m reserve in an auction in October.
2degrees had campaigned against Telecom or Vodafone being allowed the last block, arguing it should be left on the shelf for allocation later, perhaps to 2degrees when it had more money.
The Ministry of Business, Innovation and Employment said last year that mobile operators would need a contiguous 20MHz of spectrum - a minimum of two of the blocks joined together - to efficiently deploy a 4G service.
Communications Minister Amy Adams last week released a little-noticed paper prepared by the ministry that set out how the three telcos' holdings could be allocated within the digital dividend spectrum band.
The options allowed for all scenarios, except any that involved the last remaining block being placed next to the two spectrum blocks that 2degrees had agreed to acquire.
The ministry said that was to ensure it could be tacked on to Telecom's holding if the commission approved the purchase, and on to Vodafone's holding if permission was refused, given Vodafone would be next line to acquire the block by virtue of it participating in the January auction.
Commerce Commission chairman Mark Berry said that key to the decision the commission released today was that, had it blocked the purchase by Telecom, the spectrum would not have been placed in a position adjacent to 2degrees' other spectrum holdings.
"Given the blocks are non-adjacent, it reduced the prospect of the Crown and 2degrees reaching an agreement on a sale," he said.
The commission delayed its ruling three time before issuing today's ruling. It had originally expected to make a decision by February 14.
Adams said the Government had released its allocation scenarios when it did last week "in order to facilitate the timely deployment of new cellular networks using this spectrum".
2degrees spokesman Mathew Bolland said it was disappointed with the ruling and declined to comment on the paper released by Adams that preceded it.
The four allocation scenarios set out in that paper ensured Telecom's holding would not fall between those of 2degrees and Vodafone. All other combinations have been allowed.
The ministry said that would ensure 2degrees and Vodafone would be able to develop commercial arrangements to share their spectrum holdings if they wished.
The outcome leaves Telecom with 40MHz of the spectrum, Vodafone with 30MHz and 2degrees with 20MHz, and means the Crown will have raised $259m, plus GST, from the "digital dividend".
Because of its propagation characteristics, the spectrum, which was freed up by the closure of analogue television broadcasting, is best suited for deploying 4G outside densely-populated urban centres.
Adams said the three mobile operators could now "get on with building their 4G networks and providing consumers with world-class technology".
Telecom chief executive Simon Moutter said the ruling would provide significant benefits to its customers:
"The more of this 700MHz spectrum a carrier has, the faster the speeds it will be capable of offering and the more data it can carry."