Big telcos to take spectrum bait
BIG mobile carriers are throwing their hats into the ring for the coming spectrum auction. This is despite their boycott threat last year after the federal government announced a higher than expected reserve price for the sale, expected to net billions of dollars.
Optus and Vodafone, the nation's second and third largest carriers, said last year the reserve price for the spectrum that underpinned mobile networks was too expensive and threatened to pull out of the auction.
However, all three carriers confirmed on Wednesday they would formally lodge their applications before registration closed at midnight on Thursday, but they declined to reveal further details about their bids.
"We intend to lodge an application to participate in the upcoming spectrum auction" Telstra said, but declined to provide any details.
However, it is widely believed the cashed-up Telstra will bid for both 720 megahertz, used in high-speed 4G networks, and 2.5Ghz, used in wireless broadband.
Optus declined to comment but its chief executive, Kevin Russell, has previously said the telco would take part in the formal process and also look at alternatives such as building more base stations and sharing sites with Vodafone.
Vodafone, which has struggled with network problems, reaffirmed on Wednesday that it while may purchase spectrum at 2.5 GHz, it would would not participate in the prized 720 Mhz spectrum auction. The lower frequency is used in 4G networks.
A spokeswoman for Vodafone, Karina Keisler, said, "Our focus remains investing in our network so our customers can benefit today and we are very well positioned in spectrum assets for the future.
The Communications Minister, Stephen Conroy, said last year the spectrum was a premium public asset. "This spectrum is seen as the 'waterfront property' of spectrum and the government has made a significant investment to free it up. It is important that we get a reasonable return on this valuable public asset."
However, industry analysts and telco operators said the spectrum was expensive by international standards and this would affect the capital investments of operators.
"High auction costs [combined with renewal fees on existing spectrum they have already agreed to] will erode operators' return on investment ... this will slow down investment in new technology," Nicole McCormick an analyst at Ovum, said.
Analysts at Commonwealth Bank's global market research division estimate the spectrum auction will cost Telstra $2.6 billion and its high capital expenditure is unlikely to be recouped despite higher margins in the mobile business.
"Given Telstra's increasing scale and the level of industry capital investment, we have lifted long-term mobile margins ... however, it remains difficult for us to see how Telstra can achieve a fair return on the huge spectrum costs forecast," the CBA analyst Alice Bennett said.