MELBOURNE, Australia-The Australian Communications Authority (ACA) will hold the keenly awaited auction of third-generation (3G) spectrum in the 2 GHz radio-frequency band in early March.
The new 3G mobile services are expected to combine popular communications forms, such as mobile phones, the Internet and computers, into a single mobile device able to support voice, data and a range of new multimedia information and entertainment services. The success of 3G services is likely to rest as much with content providers as with network operators.
Telstra, Cable & Wireless Optus and Vodafone Holdings have been touted as almost certain bidders in the auction. It is less likely that AAPT, Hutchison Telecommunications and One.Tel will participate as they already have spectrum that can be used for 3G services. While it is possible to use the 800 MHz, 1800 MHz and 900 MHz bands for 3G services, it is likely handsets will initially be made for the 2 GHz radio frequency band.
One.Tel, backed by media magnates Kerry Packer and Rupert Murdoch, has already indicated it will not involve itself in the auction, saying it does not need extra spectrum to offer 3G services. One.Tel’s share price, which took a hammering last year, rose on the news. Initially, the company asked for a 12-month delay to the 3G spectrum auction.
Analysts think One.Tel’s financial position prohibits it from bidding for 3G spectrum. It already spent more than A$500 million (US$286 million) last year on 1800 MHz mobile-phone spectrum. Although the company said it does not plan to sell the mobile network it is building at a cost of A$1.1 billion (US$629 million), speculation circulated in October that it might do so to concentrate on the delivery of second-generation (2G), and ultimately, 3G mobile services.
Optus, too, has made it clear it will not pay unreasonable prices but has indicated it will take part in the auction. There is speculation that Optus might form a consortium rather than bid alone.
Rumors have also surrounded the sale or partial sale of Optus’ mobile business, because its major shareholder, Cable & Wireless in Britain, sold its mobile interests to Deutsche Telekom in 1999. However, Paul O’Sullivan, Optus managing director of mobiles, was reported in August 2000 to favor an international alliance with a global mobile operator.
Telecom New Zealand, as part of a consortium including NTT DoCoMo, has expressed interest in Optus’ mobile business.
The ACA is also hopeful it will be able to attract offshore bidders. To facilitate overseas interest, the ACA has enlisted the services of Deutsche Bank. Potential bidders worldwide have been sent marketing material.
Deutsche Bank has come under criticism because, in addition to advising the ACA, it is also assisting potential bidders to raise finances for licenses. Furthermore, it is advising possible suitors for the Optus mobile business.
But Australia will face competition for overseas investment with more than 80 3G licenses available worldwide this year.
Last year, the Australian government budgeted a return of A$2.6 billion (US$1.5 billion) in its 2001 estimates, although pundits now believe that figure optimistic. Results for the last two auctions of 3.4 GHz and 27 GHz spectrum were a little disappointing.
While the United Kingdom and Germany reaped handsome returns of nearly US$35 billion and US$46 billion, respectively, other 3G auctions in countries such as Switzerland and New Zealand have produced disappointing results.
In Australia’s favor, though, is a pro-competition environment, strong consumer interest and high mobile penetration. Importantly, Australia is seen as a launching pad into the key Asia-Pacific markets.
The Australian Telecommunications Users Group, however, has warned the days of mobiles as “gee-whiz” gadgets are gone, and users are only interested in sensibly priced services that provide real value.
ACA Chairman Tony Shaw said, “It is up to the auction participants themselves to decide what spectrum is worth to them based on their own business cases.”
In metropolitan areas, 60 megahertz of paired spectrum and 20 megahertz of unpaired spectrum will be auctioned, except in the nation’s capital, Canberra, where 45 megahertz of paired and 20 megahertz of unpaired spectrum will be offered. In regional areas, 20 megahertz of paired spectrum will be available.
The auction, which will divide spectrum into 58 lots with two lots offering national licenses, anticipates a minimum of four competitors in the metropolitan auction and two in the regional. The 15-year licenses will be auctioned over the Internet, as the ACA has done on previous occasions. The 2 GHz spectrum is expected to be cleared by October 2002.
