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NZ ComCom considering Spark's 2300MHz spectrum bid

The NZ consumer watchdog will decide whether Spark's acquisition of unused spectrum will substantially lessen competition in the fixed-wireless market.
Written by Corinne Reichert, Contributor

The New Zealand Commerce Commission (ComCom) is considering incumbent telecommunications provider Spark's bid to acquire the spectrum management rights for 70MHz of unused spectrum in the 2300MHz band currently held by Craig Wireless Spectrum Operations and Woosh Wireless Holdings (Craig).

The spectrum rights purchase price is reportedly NZ$9 million.

The ComCom has reported back with its Statement of Preliminary Issues, saying it will "give clearance if it is satisfied that the acquisition will not have or would not be likely to have, the effect of substantially lessening competition in a market in New Zealand".

Craig, a Canadian company based in California, had acquired the spectrum management rights from the Crown in 2007 during an auction.

Under the management rights deed entered into at the time, the holder must use the spectrum to provide either a fixed-wireless broadband service in 15 areas, serving 30 percent of the residential population in those areas; or a mobile phone service available to at least 50 percent of the entire New Zealand population.

If the spectrum continues to be unused, the terms of the management rights deed provide that the management rights will revert back to the Crown by December 31, 2016.

Spark made an application in December to acquire the unused spectrum management rights in order to expand its long-term evolution (LTE) fixed-wireless offering.

"Advances in long-term evolution technology since 2007 have led Spark to identify the opportunity to use the 2300MHz management rights to more efficiently deliver fixed-wireless broadband access services, namely broadband over LTE (BoLTE) and voice over LTE (VoLTE) services, for New Zealand customers," the application by Spark to the ComCom said.

In assessing whether the acquisition would substantially lessen competition in the fixed-wireless broadband market, as required under the Commerce Act 1986, the ComCom will consider whether, in the absence of Spark being allowed to take the spectrum management rights, they would be sold to another party or revert back to the Crown, and what an alternative bidder would use the spectrum for.

Spark argued in its application that any company acquiring the spectrum management rights would use them to roll out a fixed-wireless network.

In 2014, Spark also spent NZ$158 million to acquire four lots of 700MHz spectrum during another government auction in order to bring better broadband to remote areas.

For FY15, Spark reported a net profit increase of 16.1 percent, to NZ$375 million, despite operating revenue decreasing by 2.9 percent, to NZ$3.53 billion. The boost in net profit was attributed to the one-off sale of AAPT to Australian fixed-line provider TPG for AU$450 million.

Excluding the sale, net profit declined by 18.5 percent.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) were up 2.8 percent year on year, with mobile connections growing by 172,000.

Spark is due to report its first-half FY16 results next week, while the ComCom aims to hand down its decision on March 4.

In Australia, the federal government's 1800MHz spectrum auction saw a total spend of AU$543.5 million between the four major telcos.

Optus Mobile spent the most, at AU$196 million, followed by Telstra, at AU$191 million; TPG, at AU$88 million; and Vodafone Australia, at AU$68 million.

The 1800MHz band is currently used in metropolitan areas by Telstra, Vodafone, and Optus to deliver their 4G networks, but has been primarily used in remote Australia for point-to-point backhaul services. The reallocation of the spectrum will ensure that it is used to bring faster connection speeds to those living in regional areas.

Diversity of ownership and therefore competition was promoted during the auction, with no party permitted to acquire more than 2x 25MHz of the available spectrum, in spite of the recommendation to the contrary made by incumbent telco Telstra.

"Spectrum is a finite natural resource. When demand exceeds supply for spectrum in a band, the ACMA commonly allocates spectrum by auction. This provides a transparent process to establish a market price, ensuring licences are allocated to those who value them most highly," Australian Communications and Media Authority (ACMA) chairman Chris Chapman said.

"The ACMA considers that the price paid by bidders at an auction should provide a reasonably accurate indication of the true market value of the spectrum and identify the highest value use of the band."

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