Government reveals reserve pricing for 5G auction

Airwaves up for grabs. Image / 123rf

The government is set to raise at least $4m with its stop-gap auction for temporary 5G licences.

The amount is chump-change compared to the auction of 4G-friendly airwaves in 2014, when a $22m reserve was smashed in the final round of bidding and the Crown realised $259m as Spark spent a total $149m, Vodafone $66m and 2degrees $44m

But this is just the warm-up, with truncated two-year licences on offer as the government seeks to give itself breathing space to resolve an iwi claim on spectrum.

MBIE says will be a total of 16 lots available covering the frequency range from 3.59 to 3.75 GHz, or 160MHz total.

Cap on bids

Each lot will be 10MHz, with a reserve price of $250,000.

And while the 2014 auction was all about maximising Crown coffers, Communications Minister Kris Faafoi flagged in mid-December that a cap would be placed on how much 5G spectrum each player could bid for - the better to boost mobile market competition.

Overnight, MBIE revealed details of the cap: no single player will be able to bid more for more than 40MHz, or four lots - although there will be scope to bid for more if any lots go unsold.

Another key element is that 3.5GHz spectrum auction owners will have to hand back the spectrum they currently own before the auction - a provision that's primarily of concern to Vodafone as the only telco with a substantial 3.5GHz holding.

"That's a big tick. The Government has been listening," 2degrees spokesman Mat Bolland said in December.

However, there is a twist in MBIE's provisions announced overnight. That is, existing 3.5GHZ holders will get a discount tied to the amount of spectrum they return. How much of a discount? An MBIE spokeswoman said," We plan to release further details about the discount, and other aspects of the auction, over the next few weeks."

Maori can on-sell special allocation

Another key provision revealed by Faafoi in mid-December was that a 50MHz block of 3.5GHz spectrum would be allocated to iwi - also on short-term basis until October 2022.

The minister's office told the Herald there would be no commercial restrictions on how iwi used the spectrum - meaning it could be immediately sold or leased to Vodafone, Spark or 2degrees, allowing one or all of the telcos to top-up whatever airwaves they win at the auction.

There is a precedent.

At the 3G auction in 2001, the Labour government of the day allocated a chunk of spectrum at a low price to Te Huarahi Tika Trust - a pan-iwi group set up to advance Māori interests in 3G spectrum. The trust parlayed its spectrum into a stake in the company now known as 2degrees - a development that most pundits saw as a boon for consumers

'Stepping stone'

Faafoi has described the initial auction - expected as soon as March - as a "stepping stone".

A round of auctions for long-term licences post-2022 will take place later. Faafoi says more spectrum will also be allocated in future. Telcos expect this will be in the millimetre bands that will allow for faster 5G.

Vodafone launched 5G at 100 cell sites across Auckland, Wellington, Christchurch and Queenstown in December, using a 53MHz chunk of 3.5GHz spectrum it inherited with its purchase of TelstraClear. The telco has previously said it has ambitions to own 100MHz post-auction.

The previous month saw Spark launch fixed-wireless 5G in a series of South Island towns, using spectrum leased from UK company Dense Air - which in November 2018 paid $25.7m to acquire a 70MHz chunk of 2.5GHz spectrum from Craig Wireless and rich lister Malcolm Dick's Blue Reach Wireless.

Spark is angling to launch its first 5G mobile service in July, working with the recently drafted-in Nokia Networks and Samsung as Huawei remains sidelined by the GCSB.

2degrees has yet to set a time-table for its 5G upgrade.