ComCom delays clearance for Telecom's spectrum purchase

The Commerce Commission has again delayed giving clearance to Telecom to buy the last block of management rights within the 700MHz spectrum.

Telecom had won a bidding war with Vodafone for the block, offering $83 million. Each telco had earlier paid just $22 million for the same-sized block in the original bidding round.

The Commerce Commission has to approve the latest deal.

TUANZ chief executive Paul Brislen warns of the danger of 2Degrees missing out.

“The government auction saw three bidders (Telecom, Vodafone and 2Degrees) able to buy a maximum of three lots of spectrum each,” he says. “Telecom and Vodafone did just that, but 2Degrees only bought two lots, leaving one block of spectrum on the table.

“The advice to government from all parties was that it should remain there until the technology to deploy services on 700MHz was rolled out - implicitly, until 2Degrees could afford the extra block.

“But the government decided it wanted the cash, so raffled off the last block to the highest bidder.”

He says the problem is that Vodafone has around 300MHz of available spectrum, Telecom 200MHz and 2Degrees around 100MHz of spectrum in the all-important sub-1000MHz category.

“That means that, like for like, Vodafone can pack on three times the number of customers 2Degrees can service, and offer them the same performance. Or, looking at it the other way round, it could offer the same number of customers three times the capacity.

“That puts 2Degrees in a very tricky position, and I suspect if Vodafone had won this bidding war for the last chunk the commission would already have made its mind up and said no.”

TUANZ argued at the time that the last chunks should be left on the shelf, that if either Telecom or Vodafone got to buy it, they would put 2Degrees in an almost untenable position because the player with the most spectrum wins.

Brislen describes a “perilous” situation in telecommunications in New Zealand. “We have two players who dominate almost every market segment - mobile, broadband, toll calling, you name it. Telecom and Vodafone account for well over 80% of the customer base and revenue.

“We need to make sure 2Degrees isn't shut out of the 4G market, and beyond, and the easiest way is to make sure it has as near a level playing field in terms of access to spectrum as is possible.

“We're yet to see quite how much this contest costs but one thing is clear - customers will end up paying for it one way or another.”

Copyright © 2014 IDG Communications, Inc.

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