The Australian 3G license auction is under way.
The Australian 3G mobile spectrum auction started today, with bids for the first two rounds totaling US$398 million despite the decision from third-largest mobile operator, Telecom New Zealand, not to bid. The remaining major contenders are former monopoly telco Telstra, Cable & Wireless Optus, Vodafone, Hutchison, and Qualcomm’s 3G Investments subsidiary.
The auction is now highly likely to reach the government’s reserve price of $494 million, avoiding the kind of embarrassment seen in France. Judging by today’s bidding, it should produce four national 3G operators. Telstra and C&W Optus both bid for national licenses, while Hutchison bid for licenses in the country’s five biggest cities and Qualcomm bid for spectrum in eight major city centers as well as various smaller areas.
As the dominant operator, Telstra needs to offer a 3G service to maximize returns from its customer base. Qualcomm, meanwhile, is trying to promote its own 3G standard, CDMA2000, which few operators have adopted elsewhere. The other players’ strategy, however, is more interesting. Both Hutchison and Vodafone have been rumored as bidders for Optus, which parent company Cable & Wireless is trying to sell.
Analysts rate Singapore’s SingTel as the favorite bidder for Optus at the moment, while Hutchison’s bid for spectrum implies the Hong Kong firm believes itself to be out of the running. Yet the auction could give an indication of Vodafone’s strategy. Despite recent share price falls, the world’s leading mobile operator is definitely not short of cash and it’s trying to build a major presence wherever it can. So why has it let itself fall so far behind in these auctions?
Vodafone is still in negotiations with the competition authorities over whether it will be allowed to buy Optus and if so, how much of its existing business it would have to divest. Last month, Vodafone agreed to sell many of its customers to Hutchison to get round these regulatory concerns. Perhaps Vodafone’s reluctance to bid could be seen as a sign that it is confident that this plan will succeed.
