TPG and Vodafone’s move to jointly bid for 5G spectrum has the Finance department worried that auction prices will be dulled.
Australian Competition and Consumer Commission chairman Rod Sims revealed in senate estimates that the Vodafone-TPG merger had sent government scrambling ahead of the 5G auction.
TPG and Vodafone revealed plans for a $15 billion “merger of equals” at the end of August. It is subject to ACCC approval, with some indication of which way the ACCC will go due before the end of the year.
However, an interesting part of the merger was that the telcos also formed a joint venture to bid on 5G spectrum in Australia, ahead of the broader planned merger of their respective businesses.
It had been envisaged that Telstra, Vodafone and TPG would be the three bidders in the auction - competition limits preclude others from participating.
But there will now only be two bidders for the spectrum, and at least part of the government is worried about what that will mean, especially as the government put a very low reserve on the spectrum compared to prices paid for comparable spectrum at the end of last year.
The auction is set to begin in late November.
“The Department of Finance is concerned that there’s less competitive tension in the bid for the auction,” ACCC chair Rod Sims said today.
Sims noted that the Australian Communications and Media Authority (ACMA) - which runs the auction process - was powerless to change the process.
“ACMA determined that under their prescriptive rules - which never envisaged this situation, I might add - there was nothing else they could do but continue with the auction,” Sims said.
Sims, however, said the ACCC was not concerned with TPG and Vodafone jointly bidding for 5G spectrum.
One reason for this is that it has a written undertaking from the two telcos on just how far they can take the joint spectrum bidding company they have formed.
“We got them to sign an undertaking that they wouldn’t further that joint venture beyond the bidding for the 5G spectrum,” he said.
Sims also said that, in a roundabout way, the auction would likely achieve a result that ACCC had desired it produce all along.
“We actually recommended competition limits of 40MHz so that all three players get 40MHz,” he said.
The auction will actually allow bidders to take up to 60MHz of available spectrum each in urban areas and 80MHz in regional areas.
Two bidders vying for the 125MHz tranche of spectrum on offer means that the potential for it to be evenly shared, in line with ACCC recommendations, is now much greater.
“This joint venture coming together in a way almost achieves what we had in mind in the first place, not that we had anything to do with the joint venture happening,” Sims said.
“We desperately want to maintain and enhance competition in the mobiles market.”
The ACCC is also unconcerned in the event that the TPG-Vodafone joint venture wins spectrum but the actual merger of the two is rejected or otherwise does not proceed.
“Our considered view is them just bidding together for the spectrum doesn’t cause a competition problem because even if they get the spectrum together, they can use it separately is the technology view we’ve formed,” Sims said.
Either way, whatever TPG and Vodafone secure in the 5G auction won’t be a major determinant of whether the merger is allowed to proceed.
“It wont play a big role but it will play some role,” Sims said.
“We’ll have a better sense of what the world looks like with and without the merger, and understand what spectrum the parties have got and what they can do with it.
“But it’s not an overriding issue.”