Telstra may squeeze more from NZ unit sale in spectrum swap

Telstra Corp, the Australian phone company, may add to the $840 million it will get from the sale of its New Zealand unit by swapping certain spectrum rights with Vodafone New Zealand that could then be on-sold.

The deal will see the phone companies swap radio spectrum rights to ensure Vodafone doesn't exceed a Ministry of Economic Development cap on holdings in the 2100 megahertz band, and will leave Telstra holding rights in the 1800 MHz band, according to Vodafone's clearance application with the antitrust regulator.

"Vodafone expects that Telstra Corporation will offer retained radio spectrum for sale which will allow other providers to increase their spectrum holdings," the mobile phone company said.

The spectrum "is contiguous with 2degrees' existing allocation, potentially allowing 2degrees to obtain 25MHz of contiguous spectrum in the 1800MHz band, equivalent to Vodafone and Telecom," it said.

The Australian phone company last week agreed to sell New Zealand-based TelstraClear's voice and data-based services, network infrastructure and customer base to Vodafone New Zealand. The mobile phone company had to lodge an application with the Commerce Commission showing its acquisition of the TelstraClear assets won't substantially lessen competition.

The spectrum swap comes as the government prepares to sell rights to 700MHz spectrum, which will become available as the nation's analogue television services are switched off and replaced by a digital platform.

Vodafone touted the 700MHz auction as another option for new entrants to the market.

New Zealand's biggest mobile phone company expects the extra spectrum will cut the need for Vodafone to build additional cell sites in "metro areas where demand for capacity in increasing" and limiting its capital expenditure.

Vodafone had authorised capital expenditure commitments of $31 million as at March 31 last year, according to its 2011 financial statements. It also flagged between $50 million and $80 million of upgrades to its cell sites as part of the government's rural broadband initiative over the next six years.

The mobile phone company cites the potential cost savings from the complementary businesses as its commercial rationale for the acquisition.

BusinessDesk.co.nz

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