Telecom New Zealand has come out a winner in the country's auction of the final block of 700MHz spectrum, but had to pay through the nose to win.
The reserve price for the single 5MHz pair — which didn't sell in an earlier auction —was set at NZ$22 million (A$20.7 million), but Telecom had to fork out NZ$83 million ($78 million) to win.
In comparison, the October auction netted the NZ government a total of NZ$132 million, with Telecom paying NZ$66 million for three blocks of paired 5MHz bands.
Winning the auction means Telecom now has four blocks of spectrum for a total of two 20MHz bands, having spent NZ$149 million to acquire it.
Telecom chief executive Simon Moutter said the additional spectrum will put the telco in a strong position to support New Zealand's data, mobility and digital services future.
Rival telco Vodafone won three blocks, and has two 15MHz bands of 700MHz spectrum.
Tony Baird, the company's head of networks, said Vodafone will be using the 700MHz spectrum to deliver three-band LTE-Advanced, also using the telco's holdings in the 1800MHz and 2600MHz frequency ranges.
The NZ government's intention behind the spectrum auction is to ensure that 90 percent of the population has access to 4G mobile broadband within the next four years.
Therefore, auction winners are expected to build ten new cell sites every year for the next five years in areas where they do not currently have coverage.
Successful bidders also have to upgrade three-quarters of their existing rural sites to 4G, up to a maximum of 300 sites, the government has decreed.
Not a done deal
The New Zealand telco regulator, the Commerce Commission, has to clear the results of the latest spectrum auction and there are calls to block Telecom's successful bid for fears of market dominance.
Third mobile entrant 2Degrees, which secured two 10MHz bands in the October 2013 auction, told the National Business Review that allowing Telecom to have twice as much spectrum as a challenger "can't be good for long term competition".
It hoped the Commerce Commission would decline clearance for Telecom to acquire the last 5MHz block.
Paul Brislen, chief executive of the Telecommunications User Association of New Zealand (TUANZ) expressed concern at the high price paid by Telecom for the remaining spectrum, saying it means other investment will be shelved, or the money will be raised from customers.
Brislen estimates that the NZ$83 million would've paid for an additional 160 cell sites around the country.
According to Brislen, Telecom did not want to bid for the additional spectrum but could not let rival Vodafone acquire it and vice versa, which in turn led to a bidding war that inflated the final price considerably.
TUANZ believes that Telecom acquiring the additional spectrum breaches the provisions against market dominance in the NZ Commerce Act, and called on the Commerce Commission to block the winning bid.
"We'd argue that yes, it does [breach the Commerce Act] and I'd go further and say that both the telcos and customers would be better off if we set aside this auction and leave the last 5MHz on the shelf for the time being," Brislen said.