Telecom has bought the largest share of the radiospectrum being
sold by the government for new generation mobile services. The
acquisition, however, remains subject to Commerce Commission
The radiospectrum was auctioned by the government, starting in
late 2013. It is aimed at being used for new 4G services –
essentially bigger data, faster.
Telecom, Vodafone and 2degrees bid for the auction. In the
initial stages of the auction, 2degrees purchased approximately 22%
of the spectrum available with Telecom and Vodafone acquiring a
third each. One 5 MHz block, or approximately 11%, of the auctioned
spectrum, was left unsold. This block was auctioned in subsequent
rounds, with Telecom and Vodafone competing. Telecom ended up
bidding $83 million (plus GST) for the final bock of spectrum.
Telecom's bid is optional on it obtaining clearance from the
Commerce Commission. A clearance is a sign-off from the Commerce
Commission that an acquisition does not breach the prohibition
under the Commerce Act 1986 against acquisitions that substantially
lessen competition in a market.
Telecom applied for the clearance application in October 2013
before the auction commenced, but a Commission decision is not due
until 14 March this year.
The Commerce Commission decision will be interesting both for
the Commission's views on competition in markets and its
approach to counterfactual analysis.
In its statement of preliminary issues, the Commission invited
comment on whether the acquisition will limit competitors ability
to compete in retail mobile markers and, in particular, in 4G
mobile services. The Commission has cleared previous acquisitions
of mobile spectrum, but 2degrees has provided an economic report to
the Commission that claims the acquisition would limit its ability
to compete for customers, thereby substantially limiting
The Commission's decision will depend on a counterfactual
analysis, comparing the level of competition of an acquisition. In
its application, Telecom put forward a couple of counterfactuals.
Given the results of the auction rounds, the relevant
counterfactual appears to be that of Vodafone acquiring the final 5
MHz block. If Vodafone had done so, however, its acquisition would
also have required clearance, in which the counterfactual would
likely have been Telecom acquiring the final 5 MHz block. It will
be interesting to see how the Commission deals with this
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