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Vodafone pulled out of 4G spectrum auction months ago: govt

The Australian government has rejected suggestions that Vodafone pulled out of the spectrum auction after the government announced the reserve price.
Written by Josh Taylor, Contributor

Following the Australian government's announcement on Friday that the reserve price for the 700MHz digital-dividend spectrum band is AU$1.36 per megahertz per population, or close to AU$3 billion overall, Vodafone announced in the clearest terms that it is not going to participate. But ZDNet has learned that Vodafone told the government months ago that it had no intention of participating in the auction, contrary to public commentary at the time.

Vodafone's decision to pull out of the auction influenced the government's decision on price, and the easing up of competition restrictions to allow telecommunications companies to get a larger slice of the spectrum band, too, according to the government.

Since July, Vodafone has indicated that it may not participate in the digital-dividend auction, instead relying on the 30MHz of spectrum that it owns in the 1800MHz spectrum band for its 4G long-term evolution (LTE) network rolling out in 2013.

After losing over 1 million customers in 18 months, and reporting a loss of AU$260.2 million in the first six months of this year alone, Vodafone has turned its focus to overhauling its 3G network and rolling out 4G in 1800MHz, instead of paying money for more spectrum.

Prior to last week, Vodafone publicly never completely ruled out participating in the auction. In October, CEO Bill Morrow told the ABC that Vodafone would sit at the table, but he wouldn't guarantee that the company would buy any spectrum.

"We'll be at the table to see what the prices are and how it works. The reality is Vodafone are blessed with a great spectral position," he said at the time. "1800MHz is the one that I'm most excited about. We have 30MHz of spectrum and that is perfect for LTE as we go forward into the 4G bands. It is available to us right now. We don't have really any traffic on it, and it is something we can take advantage of."

While he said that Vodafone would sit at the table and see the prices, Morrow said that the high costs for the spectrum in the auction would be hard to justify.

But behind the scenes, Vodafone was being more definitive with the government about its intention not to participate in the auction, causing the government to revise its reserve price and up the competition limits on the amount of spectrum that companies can acquire from 2x20MHz to 2x25MHz.

The office of Communications Minister Stephen Conroy said that Vodafone had advised the government as far back as September that it would not participate in the auction.

"Vodafone advised the government in September that it would not participate in the auction for 700Mhz spectrum," Conroy's office said.

"This advice informed the directions given by the minister in relation to the digital-dividend auction."

With Vodafone out of the auction, and Optus reconsidering its position after the announcement of the pricing, Telstra is the only company that appears to be locked in to pick up spectrum at the auction. ZDNet understands that the government has not yet had any approaches from other international telecommunications companies that are interested in securing spectrum for services in Australia.

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