Possible Vodafone no-show in 700MHz auction may reduce revenue for government
- 23 August, 2012 15:51
- Comments
Vodafone Hutchison Australia’s possible absence from the upcoming Digital Dividend auction may increase the importance of auction rules to be published this November by the Australian Communications and Media Authority (ACMA). Having only Telstra and Optus participate in the auction could reduce revenue for the Australian government, wireless industry analysts told Computerworld Australia.
The Digital Dividend auction, scheduled for April 2013, will reallocate Australia’s 700MHz and 2.5GHz spectrum. The spectrum is important to the mobile industry because it can be used for 4G LTE services. The spectrum will become available when broadcasters turn off analog service at the end of 2014.
However, Vodafone has signalled it may not participate. Hutchison CEO Bill Morrow said in late July that the company will reach a decision in the next few months. Morrow emphasised the company would be fine even if it did not bid because it already has a large amount of spectrum and could comfortably deploy 4G LTE over its 1800MHz frequencies.
A Vodafone no-show could leave Telstra and Optus as the only bidders for 700MHz spectrum. “We might expect two bidders to reduce the total gross on the basis of demand alone,” and neither Optus nor Telstra wants to pay much, said IBRS analyst Guy Cranswick. “In that playbook it may be a lower price than [the government] would want or expect.”
The possibility of only two bidders makes it more important for ACMA to set a high reserve price for the Digital Dividend spectrum, Telsyte analyst Chris Coughlan said. A reserve price is the minimum price that must be paid to win the auction. Without Vodafone, that price “is very important, because that is essentially what the spectrum will go for,” Coughlan said.
ACMA plans to publish reserve prices and other auction rules in late November, an agency spokesman said. “The ACMA won’t be releasing any estimates on potential revenue arising from the auction.”
Coughlan predicted the ACMA will set the reserve price between $1.25 to $1.50 per MHz POP. That would give the government more than $3.5 billion in revenue at the end of the auction, he said. “They really need to set the reserve price up where their expectations are,” Coughlan said.
“Auction design is a critical element” to shaping results in any spectrum auction, said Stephen Moore, managing partner of Moore Wright Associates. “You need to maximise the competitive nature of each round in the auction.” For example, the government could break the available spectrum into smaller lots to increase “competitive tension,” he said. It could also adjust the geographic boundaries and licence timeframe, he said.
Supply and demand is what could limit revenue in the Digital Dividend auction, because the government is offering more 700MHz spectrum than two telcos can take, Coughlan said. The government is selling 45MHz of the frequencies, but the auction rules cap each carrier to 20MHz each. As a result, Telstra and Optus can get what they want without engaging in a bidding war, and the remaining 5MHz could go unsold.
With three carriers potentially bidding for 45 MHz, “there was a lot of contention,” Coughlan said. “Now there’s not so much contention.” The analyst said he doesn’t expect a new entrant to bid.
“If there is adequate or more than sufficient capacity for both” telcos, low bidding is possible, agreed Cranswick. “After all, in an auction when both bidders know each other's businesses, they have very good information by which to form their bid strategies.”
Follow Adam Bender on Twitter: @WatchAdam
Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia
Recommended
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.
- Bookmark this page
- Share this article
- Got more on this story? Email CIO
- Follow CIO on twitter
-
Why change management doesn’t work
-
Larry Page wants to see your medical records
-
Dual-Persona Smartphones Not a BYOD Panacea
-
After two-year hiatus, EFF accepts bitcoin donations again
-
CIOs struggle to deliver timely mobile business apps: survey
-
2013 Global Information Security Survey: Initial findings
The results of PwC’s annual Global Information Security Survey indicate that companies are confident in their efforts to secure systems, information, and privacy. Strategies and personnel are in place, they say, and processes and technology are humming along. The number of incidents reported seems manageable. Read more. -
Russian Underground 101
This research paper intends to provide a brief summary of the cybercriminal underground and shed light on the basic types of hacker activity in Russia. It discusses fundamental concepts that Russian hackers follow and the information they share with their peers. It also examines prices charged for various types of services, along with how prevalent the given services are in advertisements. The primary features of each type of activity and examples of associated service offerings are discussed as well. Read this paper. -
Devising a Server Protection Strategy with Trend Micro
With so many Information Technology solutions available to choose from today, many organizations put their trust in the experience, insight and advice of Gartner, and their industry-leading analysts. Trend Micro’s portfolio of solutions meets and exceeds Gartner’s recommendations on how to devise a server protection strategy. Precisely how Trend Micro does it is detailed in this whitepaper. Read now.
Get exclusive access to Invitation only events CIO, reports & analysis. 
