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Mobile competitors seek to gain ground on Telstra with Digital Dividend

Mobile competitors seek to gain ground on Telstra with Digital Dividend

High bidding expected from all three major carriers.

In a Telstra-dominated wireless market, competitors may see the Digital Dividend auction as an opportunity to win customers from the telecom giant, analysts said.

The Digital Dividend auction will occur in April 2013, according to a recent announcement by the Department of Broadband, Communications and the Digital Economy. All three carriers have said they are eager to bid for the 700 MHz and 2.5 GHz spectrum that’s to be made available after broadcasters permanently switch their signals to digital at the end of 2014.

Telstra had a market share of 42 per cent as of June 2011, according to the Australian Communications and Media Authority’s 2010-2011 Communications Report. Optus had 31 per cent market share, while Vodafone Hutchison Australia had 27 per cent.

The Australian Mobile Telecommunications Association doesn’t expect the Digital Dividend to have an effect on the level of competition in the wireless market, AMTA CEO, Chris Althaus, told Computerworld Australia. The market is already competitive with three major carriers, all of whom are expected to bid in the auction, he said.

But analysts cited a network coverage gap between Telstra and its competitors that the competitors are looking to close.

Telsyte analyst, Chris Couglan, predicted high bidding from Optus and possibly Vodafone Hutchison to match Telstra. In the past, Vodafone and Optus have worked together to improve coverage of their respective networks, which are not as expansive or as high-capacity as Telstra’s, Coughlan said.

The auction could be an opportunity for Optus to better compete with Telstra, agreed IBRS analyst, Guy Cranswick. “Telstra’s mobile network is known to be very strong.” As the No. 2 carrier, Optus would want to make sure they “keep almost lock step” with Telstra, “even if it’s a couple steps behind,” he said.

Optus is spending $2 billion over the next two years to take on Telstra, noted BuddeComm analyst, Paul Budde, citing a recent report in The Australian Financial Review. “Vodafone will also do this but their future remains uncertain.”

It’s possible that Vodafone may not bid, though the carrier has said it will, Coughlan said. In part, that’s because the carrier is “not short on spectrum.” A new entrant is unlikely to appear in the auction, because they would not have any mobile sites going in and the cost to build the sites is high, he said.

The government could influence the amount of spectrum won by each company through auction rules. The ACMA suggested the possibility of competition limits in April.

The AMTA, which represents all three major carriers, is wary of potentially intrusive mandates, Althaus said.

“We look with some concern to the 3G auction experience, particularly in Europe, where very high auction process held broader innovation and investment in the industry back for a while,” Althaus said. “We are very hopeful that is not the case here… There is potential for that sort of pressure to come onto the industry.”

The ACMA is expected to issue guidance soon on auction rules and other details, Althaus said. Separately, the agency is in the process of collecting June 2012 data from carriers for its next Communications Report, an ACMA spokeswoman said.

Follow Adam Bender on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU

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