New bids add colour to spectrum auction

By ADAM GIFFORD and GEOFF SENESCALL

After a disappointing start, the Government's radio spectrum auction is expected to spark into life today with the arrival of several late bidders.

Last night, at least one new player - Jump Capital, backed by the Todd family and Fay, Richwhite Holdings - confirmed it was entering the auction.

It previously bowed out amid hype that the sales would fetch as much as $650 million for Government coffers.

So far the offers amount to around $34 million. No bids were received on Wednesday in round 6, and the auction looked set to finish with a whimper if the same happened yesterday.

Then the Government called a temporary halt to the sales, citing a pending Court of Appeal hearing.

But the court threw out the challenges from the Maori Council and spectrum claimant Rangiaho Everton, prompting the Government to announce that the two gigahertz auction would resume at 9 am today.

The Business Herald understands Maori interests, under the name of Maori Spectrum Charitable Trust, have appointed merchant banking firm Ord Minnett to help find a partner for the spectrum sale. Talks are being held with local and overseas parties

Maori interests have rights to one of the four third-generation (3G) spectrum lots at a 5 per cent discount.

Meanwhile, the Government's suspension of the auction came under fire yesterday from one of the participants.

Ihug director Nick Wood said the action seemed far too convenient.

"They knew about these appeals before the auction began and decided to continue anyway. So why did they suddenly stop it? Because they assumed it would last longer and they weren't getting the bids they expected."

Mr Wood said he was surprised at the end of round 6 to be holding all the management rights for the second-generation spectrum for a few hundred thousand dollars.

"We expected there would be some opposition. We don't need it all. We just bid for everything in the early rounds because we didn't want to show our hand."

New bids are likely in this morning's round 7. Walker Wireless, Counterpoint Securities and another new entrant, Compass Communications, are all expected to challenge ihug.

Compass chief executive Karim Hussona said the company's late entry was due to an administrative mix-up in sending its deposit. Walker Wireless, which has bid only for point to point frequency lots, is also expected to bid for second generation management rights.

So far only three of the 13 registered bidders, Telecom, Vodafone and Telstra Saturn, have lodged bids for the three 10 MHz 3G blocks on offer.

Their bids are all just over the $3.5 million reserve price, giving rise to speculation the Government was taking advantage of the legal action to suspend the auction until it could work out a way to raise more money.

The 3G blocks make up the bulk of the $34 million so far offered. Less than $1 million has been bid for the second-generation frequencies, though competition has been more fierce.

Despite Justice Gault upholding the High Court ruling that Rangiaho Everton's case was so weak there was no justification for an injunction, further legal action is expected.

Maori Council executive chairman Maanu Paul said the High Court could hear the council's substantive action as early as July 24.

The action differs from the Everton claim, which the council supported as fourth defendant.

"Because [Everton] had such a poor initial case in the High Court it was difficult to overturn Justice Doogue's decision," Mr Paul said.

"We've lost the first two tests. We still have two tests to go - the Maori Council's substantive case in the Hugh Court and if we lost there, the Court of Appeal.

"We had doubts [about yesterday's action] and it would have been a miracle if we had won, but we had to go through the due process to get to our case."