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Spark's 2300MHz spectrum bid approved by NZ ComCom

Spark will use the new spectrum to roll out a fixed-wireless fibre network in rural and remote areas.
Written by Corinne Reichert, Contributor

The New Zealand Commerce Commission (ComCom) has approved incumbent telecommunications provider Spark's bid to acquire the spectrum management rights for 70MHz of unused radio spectrum in the 2300MHz band.

The spectrum, to be used by Spark to expand its fixed-wireless offering, was previously held by Craig Wireless Spectrum Operations and Woosh Wireless Holdings (Craig), with the rights purchase price reportedly NZ$9 million.

According to the ComCom, the acquisition of the spectrum rights would not stymie competition; conversely, it would provide more offerings for those living in remote areas.

"Although this acquisition may lead to Craig not expanding their wireless services, access to the spectrum will enable Spark to provide a wireless alternative for rural customers and those urban customers currently unable to access fibre internet," ComCom chair Mark Berry said.

"As a result, this acquisition may have some pro-competitive effects in the market and improve the quality of service to customers on poor-quality copper lines. The main competitive tension in broadband markets would also continue."

The ComCom had reported back with its Statement of Preliminary Issues in February, saying it would "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 had continued to be unused, the management rights would have reverted back to the Crown on December 31, 2016.

Spark made an application last 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 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.

Spark last month reported its half-year results for the 2015 financial year net earnings of NZ$158 million, up NZ$11 million year on year, and earnings before interest, tax, depreciation, and amortisation (EBITDA) of NZ$455 million, up 4.4 percent.

Broadband revenue grew by NZ$15, to NZ$339 million, with Spark increasing its broadband connections by 1,000 over the half, from 674,000 to 675,000.

"Notably, for the first time in many years, mobile and IT services revenue growth, excluding divestments and regulatory changes, has more than offset ongoing decline in landline voice and legacy data products, demonstrating a successful rebalancing of the company's focus," Spark chairman Mark Verbiest said.

"Each day, more and more New Zealanders are choosing Spark. And we're working harder than ever to help make their lives just a little better, every day. That is in turn leading to improved financial performance."

Thanks to another ComCom decision relating to copper, however, Spark's operating revenue declined by 4.1 percent for the six-month period, to NZ$1.723 billion. The regulatory changes see rival Chorus impose access charges for a majority of Spark Wholesale customers.

"The half year saw the lengthy Commerce Commission process to determine the regulated charge for access to the copper network finally draw to a close, with material fluctuations between the draft determinations in 2014 and 2015 and the final determination in December 2015," said Spark managing director Simon Moutter.

"This unfortunately has led to unexpected and significant increases to the costs to ISPs, and in turn to retail prices for our customers."

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