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2degrees urges Adams to keep remaining spectrum until after telco review

Wednesday 30th October 2013

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Two Degrees Mobile, which has grabbed about a fifth of the mobile phone market since its entry in 2009, is urging Communications Minister Amy Adams to hang on to unsold 700 megahertz radio spectrum until after a review of the telecommunications market.

Chief executive Stewart Sherriff will write to Adams asking her to shelve the spectrum until the outcome of the market review to stop dominant incumbents Telecom Corp and Vodafone New Zealand from cementing their position with more spectrum, he said in a statement. Telecom and Vodafone each spent $66 million on three lots of 2x15 MHz spectrum while 2degrees bought two lots of 2x10 MHz for $44 million.

That left one 2x5 MHz block of spectrum, the fate of which the government will decide on in the coming weeks, Adams said. The government can either let bidders compete for the remaining spectrum or retain the unsold lot and allocate it at a later date.

"There are no mobile devices or networks using 700 MHz that can be deployed in New Zealand right now, so there's no pressing consume need to sell the remaining portion of that band," Sherriff said. "It's time to take a close look at the state of competition, examine the different stages of investment each provider is facing, and make decision based on the future of a strong, three-player market."

The government put a minimum reserve price of $198 million for the spectrum, something privately-held 2degrees said was a premium to the $157 million spent clearing the radio waves in the switchover of analogue television to digital and the $119 million valuation attributed to the spectrum by the Treasury.

While some 4G capability is already available on higher MHz spectrum, the 700MHz range is especially well-suited to pushing fast mobile broadband into rural areas because it requires fewer repeater stations to achieve coverage.

Sherriff said the government needs to look at where the competition to Vodafone and Telecom will come from, and that mobile services will be affected by the introduction of ultra-fast broadband.

"There are real challenges faced by post-pay and business mobile users, which will become apparent as the government proceeds with its market review," Sherriff said.

As part of the auction's conditions, the mobile phone operators will have to upgrade existing rural cell sites to 4G capability within five years and continue to expand their coverage. That's to ensure at least 90 percent of the country has access to a 4G network within five years.

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