Telecom pays $83m for last 4G spectrum lot

The Telecom free WiFi hotspots installed into hot pink telephone boxes.

Telecom, the country's biggest telecommunications company, paid $83 million to win the final lot of 700 megahertz spectrum, flagged for fourth-generation mobile phone use.

The Auckland-based company secured the fourth 2x5 MHz lot, having spent $66 million on three lots of 2x15 MHz spectrum in the first auction, it said in a statement. Telecom and Vodafone were bidding for the final block of spectrum after Two Degrees Mobile bought two lots of 2x10 MHz lots during the first auction.

In effect, the deal sees Telecom paying close to a third more than its largest rival, Vodafone, for spectrum pairs, while locking out challenger brand 2Degrees, which sought a delay in sale of the last spectrum block in the current round.

"This fourth lot puts Telecom in the best position in the market to deliver a very high-performance 4G mobile network for New Zealand, including in less densely populated areas," chief executive Simon Moutter said.

"This demonstrates Telecom's absolute commitment to being the leader in mobile and data network capability and provides a strong foundation for Telecom to continue to deliver world class mobile and data services to New Zealanders across the country," he said.

The winning bid means the government raised $259 million from the auction of the spectrum, which became available as a result of the switchover to digital television from analogue.

The government put a minimum reserve price of $198 million for the spectrum, something privately-held 2degrees said was a premium to the $157 million spent clearing the radio waves in the switchover of analogue television to digital and the $119 million valuation attributed to the spectrum by the Treasury.

While some 4G capability is already available on higher MHz spectrum, the 700MHz range is especially well-suited to pushing fast mobile broadband into rural areas because it requires fewer repeater stations to achieve coverage and into densely populated urban settings, such as commercial buildings.

As part of the auction's conditions, the mobile phone operators will have to upgrade existing rural cell sites to 4G capability within five years and continue to expand their coverage. That's to ensure at least 90 per cent of the country has access to a 4G network within five years.

Shares in Telecom increased 0.2 per cent to $2.39 today, and have gained 3.5 per cent this year.

Both 2Degrees and Telecom had expressed concerns that the auction of a fourth round of spectrum would advantage deep-pocketed global player Vodafone.

Telecom's purchase remains subject to clearance by the competition regulator, the Commerce Commission.