By Francis Till
Friday 7th July 2000
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"There's no way any of the operators in Australasia can pay that amount of money,'' she said.
It now appears they will not have to pay anything near that amount. In fact, the auction appears likely to bring only pennies against its pound equivalents.
Analysts now generally concede the total 3G package is more likely to generate the modest $50-200 million targeted early on by the government, rather than anything in the neighbourhood of the $1.6 billion that would have been the case under the Gattung scenario.
Only 12 entities have registered for the auction, which also includes 2G bandwidth blocks. Hoped-for international players did not appear, and even some likely contenders from within New Zealand have turned away.
Of the four 3G spectrum blocks on offer, however, only three will actually be awarded competitively, and that means there is still some hope total returns will exceed the $50-200 million mark. Although prospects for this eventuality are not bright, the auction could last for as long as four months, time in which an under-capitalised but eager bidder might find external resources.
The fourth spectrum block will be awarded non-competitively to the Maori Spectrum Charitable Trust, which will develop it in conjunction with an as yet undecided commercial partner, who will front up with the money for the purchase price, set at 5% below the lowest successful bid for any of the other three blocks. The trust has indicated as many as 18 outside entities have indicated interest in partnering.
Five of the 12 registered bidders - the Genesis, Mighty River and Transpower utility companies, TVNZ and Airways Corporation - are state entities not likely to be interested in the 3G blocks. Another, Ihug, has signalled through publicity surrounding its failed lawsuit to block the auction that its primary interest is in 2G spectrum, but it is predictably unpredictable when it comes to competition.
Of the remaining six registered bidders, only the three large incumbents - Vodafone, Telecom and Telstra Saturn - are seen as having the resources to buy out the biddable 3G.
Dark horses, any of which could prove to be the force that drives the stakes higher, are Walker Wireless, newspaper publisher INL and Counterpoint Securities, a subsidiary of Savoy Equities. Savoy's interest stems from a now-abandoned relationship developed with Ericsson in early discussions about the auction. Neither INL nor Walker Wireless have indicated which part of the auction they are targeting, nor given any indication of the resources they are willing to commit.
Locally, several serious players who were expected to join the auction declined to take the field. Clear Communications has chosen to focus on its LMDS network rollout rather than spread itself thin by attempting to compete in a 3G effort, and Jump Capital, a completely new player, may have chosen to develop infrastructure which it can then lease to spectrum owners rather than bid on the spectrum itself.
Quest Communications, a Southern Cross Cable bandwidth wholesaler, cited a lack of confidence in the government for failing to make its long-planned, $1 billion war chest entry into the bidding.
The absence of international entries came as a surprise. Some had expected a bid from Ericsson, which might have come in collaboration with Savoy, but the Swedish company now appears to have stayed away. Hutchison Whampoa, which already has a stake in Australia, also did not turn up despite speculation New Zealand spectrum was a natural buy for it.
One thing seems certain: the auction could return the world's lowest yield to date.
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