Auction at mercy of bidding shenanigans

By PAULA OLIVER

Bidders are taking advantage of lax rules to send the value of the Government's radio spectrum auction spiralling downwards.

The auction of second and third-generation (2G, 3G) frequency is four months old today, but its total value is starting to resemble a hospital heart monitor as it climbs high one day and plummets the next.

Total bids ended yesterday at $126 million, after stretching as high as $135 million, and as low as $121 million earlier this week. Causing the fluctuations is a series of withdrawn bids that eventually have the effect of stripping a lot's value back to its original reserve price.

The Ministry of Economic Development's rules do not penalise a bid withdrawal, unlike a recent Australian auction that charged a hefty fine.

Telecom was the first to send the auction plummeting three weeks ago, when it withdrew $21 million worth of 3G bids. Since then, other players have jumped on board and withdrawn bids, effectively lowering the auction's value and their own costs. Worst affected are the 1098 frequencies, broadband lots designed for high-speed data transmission rather than cellular networks.

After peaking at more than $20 million, the 1098 lots are now worth $11 million combined. This week Telstra Saturn withdrew a $3.3 million bid for a chunk of 1098 and watched its value fall for five rounds, before making another bid to reclaim the lot for just $1.68 million.

The move halved the amount Telstra Saturn had to pay for the lot, and kept the auction rolling. Also withdrawing bids are Australian company Hutchison Telecommunications, Clear Communications and TVNZ-owned Broadcast Communications.

Although some bidders are known to be frustrated at the way the auction is progressing, auction spokesman Kevin Kelly said last week that no rule changes were imminent.

The ministry has twice moved to speed the auction's pace by increasing the number of bidding rounds a day, and although that has succeeded, the auction is now being held back by bid withdrawals.

3G spectrum is worth $82.8 million, and held by Telstra Saturn and Telecom, while Vodafone and Clear Communications each hold half of the other available block.

Every available lot of 2G spectrum totalling $26 million is now being held by giants Telecom, Vodafone, Telstra Saturn and Clear.