Merger frees 3G spectrum market

By PETER GRIFFIN telecoms writer

The rights to a chunk of third-generation (3G) radio spectrum could soon be up for grabs with the merger of TelstraSaturn and Clear Communications giving the new entity more spectrum than it is allowed.

The Ministry of Economic Development has given TelstraClear 90 days to offload a 5MHz (megahertz) block of 3G spectrum bought in the Government-run auctions completed in January.

Clear and TelstraSaturn both bought 10MHz blocks of 3G spectrum through the auction process, in which $133 million was raised.

But auction rules ensuring no one bidder has an unfair advantage in the market for advanced mobile voice and data services capped spectrum purchases at 15MHz.

"The merged entity will have 20MHz. That would be a breach of the rules," said David King, the ministry's manager for telecommunications.

"If they don't sell [the spectrum], they'll have to return 5MHz to the ministry."

But buyers are few and far between. Telecom spent nearly $17 million during the auctions securing the maximum allocation of 3G spectrum. Vodafone, however, bought 10MHz, potentially giving it an opportunity to do business with TelstraClear.

Vodafone declined to say if it was interested in adding to its collection.

Econet Wireless, a new operator which plans to develop a mobile network in New Zealand next year, does not own any 3G spectrum, but its partnership with the Maori Spectrum Trust - which was reserved a 15MHz block of spectrum in the auctions - would effectively rule it out as a potential buyer.

"There are quite strict associate rules that apply. It might make that difficult," said Mr King.

Whether the spectrum sells is likely to come down to price. A 5MHz block of 3G spectrum sold for an average price of $2.5 million in the auctions, but interest in 3G services, already on the wane when the auctions started, has declined further this year.

Bob Smith, managing director of Walker Wireless, which picked up spectrum in the 1098 band of frequencies, said more spectrum would be attractive, at the right price.

"We think we've got enough spectrum to do what we do. We would like more but it comes back to how much it will cost," he said.

A spokesman for TelstraClear, Quentin Bright, said the company was working through options for divesting the spectrum but declined to give details.