NZ government sets reserve price for 4G spectrum

The government has set a reserve price of $22 million for nine paired lots of the 700MHz spectrum band, which will go to auction on October 29.

Allocation of the spectrum will allow the building of fourth generation (4G) mobile networks, using the spectrum freed up by the switchover to digital television. Nine lots of 5MHz paired will be auctioned.

The government spent $157 million clearing the 700MHz band.

“In setting the reserve price, we have balanced generating a fair return on the sale of the spectrum rights with the significant investment required by mobile network operators to build the 4G network infrastructure,” communications minister Amy Adams says.

“The reserve price also takes into account the value to New Zealand of having 4G connectivity widely deployed.”

The auction terms will provide a deferred payment option for successful bidders over five years, subject to payment of a commercial interest rate.

“Allowing staged payment will enable mobile network operators to invest immediately in building their 4G networks to increase their service to New Zealanders,” Adam says.

The auction conditions also include requirements for mobile network operators to upgrade their existing rural cell sites to 4G capability within five years, and for successful bidders to continue expanding cellular coverage.

“These requirements are designed to ensure that at least 90 per cent of New Zealanders have access to a 4G network and faster mobile broadband coverage within five years,” Adam says.

Adams has forecast economic benefits from 4G of up to $2.4 billion over the next 20 years.

The licences are expected to be bought by Telecom, Vodafone and Two Degrees. Three Maori groups have lodged a claim for the spectrum with the Waitangi Tribunal.

Telecom put out a statement welcoming the decision.

Industry lobby group TUANZ, which had pushed for no auction – rather a straight 15MHz allocation to each of the three network operators – says it is happy with the five-year deferment plan, given that it will probably take that long to get a 700MHz network up and running with end-user devices.

Chief executive Paul Brislen says the next stop will be to watch the auction closely to make sure that the larger players don’t make life costly for the new entrant (Two Degrees).

“The government had signaled in an earlier discussion document that it would be quite happy to see two players buy 20MHz each, should one player drop out,” he says.

“That is unacceptable to us and to the New Zealand customers, all of whom remember life under the cosy duopoly. We need to have three network operators to make sure we have decent pricing.”