Vodafone and Optus likely to skip 700MHz auction as it will cost around AU$3 billion

Telecom Lead Asia: Major Australian mobile operators — Vodafone and Optus — are likely to skip auction for 700MHz as it will cost around AU$3 billion.

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Last week, Australia’s telecom minister Stephen Conroy announced a reserve price of AU$1.36 per megahertz per population for the digital dividend spectrum in the 700MHz band, to be auctioned off in April next year.

While Vodafone Australia has decided not to participate in the auction for 700MHz band, Optus is reconsidering its participation.

Vodafone Australia will rely on its holdings in the 1800MHz spectrum band to roll out its own LTE / 4G next year and focus on continuing overhauls of its 3G network.

In fact, Vodafone Australia has lost over a million customers in 18 months due to under investment in its 3G network.

“We will not be participating in the auction for 700MHz under the current terms. Vodafone is fortunate to have one of the best spectrum holdings that is well suited for data capacity and 4G technology. Our investment focus in the near term is on a network experience that our customers can benefit from as soon as possible,” said Vodafone in a statement.

David Epstein, vice president of corporate and regulatory affairs, Optus, said: “The price is double the price of the same spectrum in other parts of the world. Optus is studying the detail of the government’s announcement, but as announced, it appears unworkable and out of line with international outcomes.”

The spectrum is likely to have the effect of restricting investment significantly, raising prices as costs are passed through to consumers, and reducing consumer choice.

Optus will be looking at options other than acquiring more spectrum for delivering 4G / LTE services.

Telstra that competes with both Vodafone and Optus is yet to announces its strategies.

“We will consider it in detail as part of our auction strategy. Given this is an auction process, we have no further comment,” said Telstra in a statement.

The Australian government is using the spectrum auction to reach its AU$1.1 billion budget surplus in 2013.

Meanwhile, the Dutch state raised much more than expected in its auction of 4G frequencies, with prices so high market leader KPN said it would have to cut dividends to afford its licences.

The auction raised $5 billion.

The Dutch market is currently dominated by KPN, Vodafone and Deutsche Telekom, all three of which won licences, as did new entrant Tele2 of Sweden.

Two cable companies – Ziggo and UPC, owned by Liberty Global, which already have strong shares in broadband and pay-TV – said they made a joint bid but later pulled out of the auction later because the bidding went too high.

The Dutch government had counted on raising about 480 million euros from the auction, and the better-than-expected result provides a welcome windfall at a time of austerity measures and budget cuts amounting to 46 billion euros by 2017.

The Netherlands set aside spectrum for new entrants at the October 31 auction in a bid to boost choice and lower prices in a country with 19.6 million mobile phone subscriptions – more than one for every head of population.

The auction of 41 separate spectrum licences was the biggest in Dutch telecommunications history, the state telecoms agency said on Friday.

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