Bloomberg News

Australia Seeks A$3 Billion From Telstra, Optus Spectrum Sales

February 12, 2012

Feb. 10 (Bloomberg) -- Australia expects to get about A$3 billion ($3.2 billion) in the next four years from the renewal of mobile phone spectrum to providers including Telstra Corp., Optus and Vodafone Group Plc.

Operators in the highest-priced part of the spectrum will pay A$1.23 a megahertz per person in a given area for 15-year permits, the office of Communications Minister Stephen Conroy said on its website. The price for services in the 800 megahertz band, used to provide smartphone data, is 16 percent less than suggested in a draft decision last year.

Access to prime mobile airwaves is highly valued by phone companies as consumers switch to wireless connections and drop fixed-line services. Spectrum that allows companies to run lucrative services such as smartphone data sells for several hundred times the value of lower-ranking bandwidth.

“This renewal process will ensure an appropriate financial return to the taxpayer, while providing certainty to industry and consumers,” Conroy said in the statement.

The price expected by Australia’s government compares with recent auctions of the 800 megahertz band which raised 2.96 billion euros ($3.93 billion) in Italy, 3.57 billion euros in Germany, and 2.64 billion euros in France. Those countries have three to four times Australia’s population of 22.8 million.

Megahertz are a measure of the frequency of electromagnetic waves such as radio. Lower frequencies such as the 800 megahertz band have wavelengths that allow them to bend more easily around obstructions such as buildings in urban areas.

Telstra, Optus

The A$1.23 per megahertz per person cost of the 800 megahertz band compares with 0.214 Australian cents for the higher-frequency 27 gigahertz band.

“There’s less capital expenditure to provide service at lower bandwidths,” said Chris Coughlan, director of research consulting at telecommunications analysts Telsyte.

Australian licenses to the 800 MHz band were last issued in 1997 and 2000 and expire before 2017.

Conroy didn’t say what each company would have to pay.

Melbourne-based Telstra is the nation’s biggest operator, followed by Optus, a unit of Singapore Telecommunications Ltd.

“We’ll borrow for the spectrum as promised, and we have plenty of capacity on the balance sheet to do so,” Telstra Chief Executive Officer David Thodey told an analyst call after first-half earnings yesterday. The company has been working to sign up more mobile customers as it prepares to hand over its fixed-line network to state-owned NBN Co.

Telstra will consider today’s announcement before deciding what it will do, spokeswoman Nicole McKechnie said by phone. Daniel Wong, a spokesman for Sydney-based Optus, wasn’t immediately able to comment.

Vodafone Hutchison Australia, a venture between Newbury, England-based Vodafone and the Australian unit of Hong Kong billionaire Li Ka-shing’s Hutchison Whampoa Ltd., is the third largest by subscribers.

Vodafone Hutchison plans to renew its license following Conroy’s announcement, Chief Executive Officer Nigel Dews said in an e-mailed statement.

--Editors: Robert Fenner, Subramaniam Sharma

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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