Analysts have pointed to TPG’s bid for wireless spectrum as one of the most interesting developments in the Digital Dividend auction.
TPG paid $13.5 million for 2x10MHz in the 2.5GHz band. In a statement, TPG called its new spectrum “a valuable asset which, with developing technologies, will bring TPG the opportunity to offer innovative and value-adding products to its customers, particularly in the increasingly important wireless broadband market.”
“It looks like the rumour about [TPG’s] intentions as a mobile operator are real,” IBRS analyst Guy Cranswick told Computerworld Australia. “That could add another small competitor.”
“While potential plans to become Australia’s fourth MNO [mobile network operator] would be ambitious, we do not view this as unrealistic,” said Ovum analyst Nicole McCormick.
“TPG has demonstrated expertise in running a lean business model and it has the platforms (e.g. billing) in place to support an extended mobile business – something which defunct One.Tel did not have.”
TPG currently offers mobile services as a mobile virtual network operator (MVNO) riding the Optus network.
Gartner analyst Geoff Johnson said TPG’s “modest investment” in the 2.5GHz spectrum shows “these guys are thinking carefully of their total strategy.”
“If you imagine an NBN environment ... there’s going to be a sharing of central infrastructure and ability to package it with mobile infrastructure [and] mobile services,” Johnson said. “So they’ve got something up their sleeve there.”
While the 2x10MHz of 2.5 GHz spectrum acquired by TPG is not large, they can do “at least basic services” in capital cities, said Johnson. The spectrum could also be used for narrowband machine-to-machine (M2M) services, something Telstra and Optus do not do well, he said.
Alternatively, TPG might choose to resell or find other opportunities for the valuable spectrum, he said. “It’s kind of a gold-rush claim. You put a stake in the ground for $13.5 million [which is] not huge.”
Telecom analyst Paul Budde expects TPG to play its cards close to the chest. “They are a very secretive company so I assume it will take time before we get a better picture of that.”
A ‘responsibly managed’ auction
While the government missed $1 billion in potential revenue when it failed to sell 2x15MHz of the available 700MHz spectrum, multiple analysts said the result could have been worse.
“Given the rules of the auction and the no show of Vodafone it probably went as well as the government could have hoped for,” said IBRS's Cranswick.
“Another bidder would have had a more influential impact on the sales and prices.”
The result “seems to have been responsibly managed,” given the absence of Vodafone Hutchison Australia, agreed Johnson. If Communications Minister Stephen Conroy had not raised the price of the 700MHz spectrum, the total revenue would have been “way lower,” the analyst said.
In addition, Johnson predicted “demand will creep back” for the unsold spectrum “over the next two to three years” as mobile data demands continue to put a crunch on telcos’ capacity.
Budde agreed that the spectrum could still fetch $1 billion in two years. “The spectrum is very valuable, there will always remain a shortage and the growth in mobile [broadband] is unlikely to stop,” he said. “It just gives the industry a breather before they have to hiccup more money.”
Telstra’s $1.3 billion spectrum spend, twice the amount paid by Optus in the auction, positions the number-one Australian telco to drive further ahead of its competition, said Cranswick.
Ovum’s McCormick said she was surprised that Vodafone didn’t bid. “We think it would have been a sensible long-term spectrum insurance policy for Vodafone to have picked up 2.5GHz spectrum for data traffic management purposes in the metro areas.”
Telstra and Optus will use their newly acquired spectrum to provide better quality mobile service for Australians, including better coverage and reliability, the analysts said.
The spectrum is critical to achieving the Australian telcos’ 4G plans, said Johnson. “There’s no show without spectrum.”
Follow Adam Bender on Twitter: @WatchAdam