Optus satisfied with spectrum winnings in Digital Dividend auction

Telco says falling mobile revenue part of an industry trend

Even if the price for spectrum in the 700MHz band had been set lower, Optus may still not have bought more than 10MHz of the 45MHz that was available in the Digital Dividend auction, according to Optus chief country officer, Kevin Russell.

Under the auction rules, telcos could buy up to 25MHz of the so-called “waterfront” 700MHz spectrum. In the end, Optus bought 10MHz, Telstra took 20MHz and the remaining 15MHz went unsold.

The auction lasted for only one round and spectrum sold at the reserve price of $1.36 per MHz POP. POP is a telecom term measuring the amount of spectrum owned in a region multiplied by the number of people reached.

“The fact that the spectrum was set at prices that were beyond international benchmarks certainly influenced our thinking in terms of, ‘Would we consider any more?’” said Russell. “But I would definitely stop short of saying if the price had been substantially lower that we would have necessarily” purchased more spectrum.

Before the auction, Optus had publicly slammed the price of the 700MHz spectrum. Optus regulatory affairs vice-president, David Epstein, stated in December that the price was “unworkable and out of line with international outcomes.”

Telecom analyst Chris Coughlan has said he believes Optus would have bought more if the price was lower.

"I'm sure that Optus would have doubled their holdings if the 700MHz reserve was down near the 70-80 cents per MHz POP," Coughlan recently told <I>Computerworld Australia</I>

However, Russell said that the 10MHz purchased by Optus was all the telco needed.

“We required 700[MHz spectrum] for core 4G coverage—in-building coverage in metro and broader geographic coverage in regional,” Russell said on a media call as Optus released its financial results for the quarter ending 31 March.

“Our view from the start was that 10MHz of spectrum would be more than adequate in terms of delivering that capability.”

“When you start looking at whether you need more spectrum than that, then you starting to look at what drives your strategy with relation to speed and capacity,” Russell said.

Coverage requires low-band spectrum like 700MHz but speed and capacity can be achieved by using “using cell sites at the right economics in terms of site sharing and leveraging high-band spectrum,” of which Optus has a large amount, he said.

“In terms of customers’ needs in 4G, we feel the speed [and] capacity element is more than satisfied by the high-band spectrum,” he said. “The coverage element is more than satisfied by the 10MHz of 700[MHz spectrum].”

Communications minister Stephen Conroy has said the government would return the leftover 15MHz of paired 700MHz spectrum to the market in the next two to three years. Russell said Optus will decide later whether it participate.

“We need to understand what the processes” and “expectations are for that,” Russell said. “As we go forward with our network, spectrum and infrastructure site strategy, we will continue to review options.”

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