Spark's Moutter bangs drum for 5G spectrum auction

Thursday 21st February 2019

The government needs to keep its next radio spectrum auction on schedule if Spark New Zealand is to have a 5G network up and running by July 2020, the company says.

Managing director Simon Moutter says he would prefer Huawei Technologies to be in the mix as a partner for the next iteration of mobile technology, but that Spark's policy has always been to use multiple firms to minimise the risk of being hitched to one ride.

Spark wants to be a front-runner in rolling out 5G, which Moutter says enhances the prospect of wireless broadband grabbing market share from mixed networks. That ambition hit a stumbling block last year when the Government Communications Security Bureau rejected an application that included Huawei, citing national security concerns.

While Moutter's still a strong advocate for Huawei being in the mix, he downplayed its importance when quizzed by analysts at the telecommunications carrier's first-half earnings briefing yesterday.

"The Huawei decision by the GCSB is a setback in terms of removing a vendor who has terrific technology and is a very strong performer, but does not alter our plans or timeframes for our intended launch and participation in 5G," Moutter said.

Spark says it can build the first phase of the 5G network - which involves the dense roll-out of smaller cell-sites - within its budgeted capital spending of 11-12 percent of revenues, or roughly $410 million in the current financial year.

Moutter told analysts the company is already using its mobile capital expenditure budget to prepare for 5G through what he described as "densification work". It would like to switch all of that infrastructure spending to pure 5G work this calendar year.

"We simply await the auction of 5G spectrum. We'd like to be up and running by July 2020 at the absolute latest. The sooner the auction is completed, the sooner we come to market," he said.

Spark has been pushing the government for an auction, however, policymakers are cautious about how they allocate spectrum to iwi interests. Maori missed out on a special allocation in the 4G auction in 2013, instead receiving a $30 million development fund to help Maori benefit from new technology.

Communications Minister Kris Faafoi has previously said the government is working towards the timeframe his predecessor, Clare Curran, set for allocations in early 2020.

The New Zealand Maori Council yesterday urged for the process to be paused until it was apparent what role there would be for Maori and Maori organisations.

"The New Zealand Maori Council sees the building of a new 5G network as an opportunity to bridge the skills divide when it comes to the digital, information technology and telecommunications sector," executive director Matthew Tukaki said in a statement. "At the moment we have low rates of participation and we see this as a significant opportunity for growth.

"This is a gentle reminder to the government and to providers who want to bid for the 5G network that the Maori Council won’t allow this to slip through to the keeper again."

Maori were granted the right to buy 3G spectrum at a discounted price in 2000, which effectively paved the way for Two Degrees Mobile to enter the local mobile market. The Hautaki Trust last year transferred its stake in the country's third-placed mobile carrier to the company's majority shareholder, Trilogy International, which bundled 2Degrees into a larger telecommunications group and listed that entity on the Toronto Stock Exchange.

Huawei has partnered with 2degrees since 2005 and built its 4G network in 2013. Spark's Moutter told analysts the Chinese company's technology is embedded in the consumer market with widespread use of its handsets and fixed and wireless modems. Network operator Chorus also has heavy exposure to Huawei, he said.

Huawei's New Zealand arm generated about $150 million of revenue in calendar 2017, down from $180 million in 2016, according to its latest financial statements lodged with the Companies Office.

Spark uses Huawei for its radio access network - essentially the cell towers - but not its core network, which directs services over that infrastructure. Spark's core network was built by Cisco and Ericsson, with the telco keeping different vendors on its books for commercial reasons.

Moutter noted that the risk of having a single partner heightened during the past year and a half, and it "would have been foolish for us to not have been prepared."

Still, Spark would prefer Huawei to be a potential partner, and Moutter told BusinessDesk he's been a very public supporter of the Chinese company.

"We have nothing but good things to say about Huawei and have no evidence ever of them doing anything New Zealanders would regard as dodgy. They've been a terrific provider of technology and a great partner to work with."

(BusinessDesk)

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