NZ Gov't Warned Not to Hype Spectrum Auction

AUCKLAND (05/05/2000) - The U.K's NZ$70 billion (US$ 34.4 billion) phone auction frenzy is unlikely to be repeated here, say analysts and phone companies.

Last month's auction was for the third generation of mobile services in the U.K., which will allow full Internet access, e-mail and video services through handsets with large screens.

New Zealand's auction, to be held in July, is only expected to raise NZ$100 million, instead of several billion dollars it could earn if it was as hotly contested.

New Zealand phone companies and Telecom Users Association of New Zealand (Tuanz) chairman Ernie Newman are anxious to avoid talking up a bidding war, fearing higher license charges will mean higher charges for phone users.

Critics have branded the U.K. government's windfall -- 10 times what it had budgeted for and five times what analysts had expected -- as a hidden "telephone tax" on the U.K. population.

All four existing U.K. mobile operators -- Vodaphone Airtouch, BT, Orange and One2One -- secured a license, together with newcomer TIW of Canada. TIW paid NZ$13.2 billion, Vodaphone paid NZ$18 billion and the others paid over NZ$12 billion for their licenses -- an amount totalling more than NZ$3000 for each U.K. household.

However, Australian telecommunications analyst Paul Budde believes the Kiwi auction will only raise around NZ$100 million, saying circumstances here are radically different. This approximates at around NZ$100 per New Zealand household.

Budde says the British experience was "mind boggling. The reason people are bidding so high is they expect the majority of voice services will be transferred from the fixed system to the mobile system."

The U.K. auction had 13 initial bidders, but Budde says New Zealand could expect only three to five bidders, with a similar number of licenses available.

Budde bases his NZ$100 million forecast on it being a third of the expected NZ$300 to NZ$400 million cost of setting up the system.

Newman says: "If the government hypes up or talks up the auction, they are in effect taxing cellphone users because ... the cost of the premium will fall back on the users."

Phone companies also played down the U.K. auction and declined to comment on whether they would take part. Telecom spokesman Gerry Eller says the U.K. prices were "excessive and would not be sustainable in New Zealand". Deanne Weir of Telstra-Saturn agrees, and Vodaphone spokesman Mark Champion says:

"Let's watch (the auction) unfold rather than be speculative."

A spokesperson for acting Communications Minister Trevor Mallard, says the government has not made a budgeted or estimated figure for the sale, "because no one knows what it's going to be worth".

However, she confirmed speculation that the spectrum could raise NZ$50 to NZ$200 million.

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