3G sale risks lack of buyers

TelstraClear is being forced to shed excess spectrum, but is likely to find potential bidders thin on the ground. ADAM GIFFORD reports.

TelstraClear is about to call for tenders for a block of third-generation spectrum it must sell as a condition of the merger between TelstraSaturn and Clear Communications.

But an industry analyst says the company will be hard pressed to sell the spectrum, and it could end up forfeiting it back to the Crown.

In last year's spectrum auction, Clear bought 10 megahertz (MHz) of 3G spectrum for $10.05 million. TelstraSaturn bought its 10 MHz for $8.33 million.

Government rules prevent any company or associated party owning more than 15 MHz of 3G spectrum. TelstraClear must sell at least 5 MHz, and could sell 10 MHz without compromising its ability to create a future 3G network.

TelstraClear's David Owen said several organisations had expressed interest in buying the spectrum. He said tenders would be called this week with the buyer announced in the middle of next month.

However, potential buyers seem thin on the ground. Telecom has 15 MHz, so is ineligible to bid. Vodafone holds 10 MHz. Buying 5 MHz from TelstraClear would lock out any other potential entrant to the market, but Vodafone carrier relations manager Francois Zegers said that was not a good reason to buy.

"We don't need it to create a network, but there is some benefit from a radio-planning aspect to have the full 15 MHz," he said.

"We wouldn't be going out there to buy spectrum at any price."

The other 3G spectrum holder is Hautaki Trust, a body set up after an out-of-court deal between the Government and Maori broadcasting litigants.

Hautaki has the right to buy 15 MHz of spectrum for $13.46 million, 90 per cent of the average auction price. It has transferred that right to mobile network newcomer Econet Wireless as part of a deal that gives it a 30 per cent stake in Econet.

While it appears cheaper for Econet/Hautaki to buy 10 MHz from TelstraClear for a lower sum, the advantage it has over its competitors is it doesn't need to pay for its spectrum until it is ready to use it.

Walker Wireless chief executive Bob Smith said that, while his company was a possible bidder, it had all the spectrum it needed "for the foreseeable future".

Another potential bidder is state-owned enterprise Broadcast Communications, but managing director Geoff Lawson said he would not comment on whether the company had any interest in the spectrum.

Australasian telecommunications analyst Paul Budde said it was hard to see TelstraSaturn finding a buyer.

"Apart from Hutchinson and therefore indirectly Telecom, hardly anybody is doing anything with 3G," he said, adding that most 3G developments around the world were on hold or had been pushed back. He said 3G was overhyped and was not able to deliver mobile data at a significantly increased speed to make it more attractive than existing technologies.

"It is technology you might use if your network in London or Frankfurt was running to capacity and you might want to upgrade, but outside of metropolitan Europe the business case is not there."