Bizarre Telecom bid angers spectrum rivals

By PAULA OLIVER

Frustrated bidders expressed anger at the Government's radio spectrum auction yesterday, after Telecom made a bizarre move to keep the seven-month-old sale going by bidding over the top of itself.

The auction of second and third-generation (2G and 3G) spectrum has been riddled with problems since it began last July, but yesterday's events raised a powerful reaction in the industry.

The auction's rules state that it will end after one round passes without any bidding activity. That would have happened in the management rights section of the auction yesterday if Telecom had not made a lone bid over the top of itself for one lot.

In doing so, Telecom has effectively pledged $2.8 million more than it needed to for the slice.

Auction opponents say Telecom is keen to keep the auction going so that it can snare more customers in the valuable mobile market, while other companies are forced to wait to claim some spectrum.

The spectrum on offer can be used for anything from cellular networks to new 3G technology such as video on to handsets.

But a Telecom spokeswoman told the Business Herald that the telco was still assessing what it wanted in the auction. She pointed out that Telstra Saturn had made a move in the last round yesterday, showing some parties had not yet settled on what they wanted.

Clear Communications, which has bid for both 2G and 3G spectrum, said it would be desirable to see the auction end.

"Right from the beginning we wanted a speedy conclusion in our own interests as much as anybody else's," said spokesman Ross Inglis.

"The market in New Zealand is crying out for competition in mobile, especially in the emerging 3G, where I think there's pent-up demand for the services it can deliver."

Another bidder, who did not wish to be named, said Telecom's move was extremely frustrating.

"They're well within the rules so they could go on like this for some time yet," the bidder said.

Of all the bidders left, Telecom has most money on the table. It has bid almost $50 million for 2G and 3G spectrum, including three pairs of 2G - more than any other bidder.

While its bids are within the auction rules, it will need when the auction ends either to gain Commerce Commission approval for its purchases or to demonstrate why they will not result in a breach of the Commerce Act.

Competitor Vodafone elected to pursue commission approval last month for its proposed purchases in the auction. It was given approval to buy an undisclosed amount of spectrum.

The commission's Commerce Act manager, Geoff Thorn, said none of the other bidders had yet received any advice on what their buying limit might be.

But in making a decision, the commission would weigh up whether the bidder would establish a dominant position in either a national mobile services market or in a 3G mobile services market.

At the close of bidding yesterday, the auction's value had reached $155 million.