$5m spectrum auction deposit D-Day: Tex turns up at MBIE, hoping for miracle of the loaves

As promised, 2degrees founder Tex Edwards turned up at Ministry of Business, Innovation & Employment's Auckland office this afternoon.

His mission: to pay the $5 million deposit to participate in the government's pending 4G spectrum auction.

His currency: a basket of sim cards and bread.

While at MBIE's reception, Mr Edwards placed a call to the ministry's radio spectrum policy and planning manager Len Starling.

Mr Starling did not pick up the phone. 

But earlier, MBIE spokeswoman Philippa Norman told NBR ONLINE the four registered bidders (Telecom, Vodafone, 2degrees and Mr Edwards' KLR) were required to pay the deposit in the form of a $5 million Bankers' Certificate from an NZ-registered bank.

The publicity stunt petered out as with Mr Edwards leaving a message for Mr Starling with a receptionist.

Mr Edwards, who was fired from the company he founded but holds a 1% stake in 2degrees, says his latest antics are to highlight a serious issue. 

The 2degrees founder says MBIE and the Commerce Commission have placed too much emphasis on total mobile connections. Mobile revenue share is a better metric - and one that reveals that Telecom and Vodafone still have a lock on high-yielding post pay or "contract" customers. 

In a bid to visually illustrate this point, Mr Edwards filled his basket with Vogels - which he says is a premium bread. Every loaf of bread is not equal, just as every sim card is not equal, Mr Edwards says. Telecom and Vodafone have leveraged their larger market share to keep a tight grip on contract customers, who pay a lot more amonth than pre-pay customers.

Mr Edwards is acting in a personal capacity. 2degrees picked up similar themes in its spectrum submission however, focussing on the business market and its lower revenue share figure rather than the million customer connection number it pushes in other contexts. At its last market update 2degrees said 10% of its customers were on contract - low compared ot market leader Vodafone with around 33%. 2degrees did win one major concession during the submission process, however, with the government agreeing to its multi-year pay-by-installments proposal.

"And I'll just stare at my screen until goes away. Bit longer. Little bit longer ..."

No left-field contenders
Assuming Mr Edwards bread is rejected by Mr Starling (although with a surname like that, it could tempt), that will leave just Telecom, Vodafone and 2degrees - a disappointment for those hoping the likes of an infrastructgure player such as Kordia or a left-field player such as Google would jump in (the search giant has participated in spectrum auctions in the US, where it is an emerging infrastructure player through its land-lubbing Google Fibre and various metro wi-fi initiatives).

And the government has ruled out a special allocation of spectrum for Maori - as was was the case at the 3G auction in 2000, allowing Mr Edwards to ally with the Hautaki Trust and utilise the spectrum for by the company that became 2degrees (the iwi spectrum is now owned by 2degrees, whose majority shareholder is US company Trilogy International Partners).

Three lots, three bidders
So the 2degrees' founder's bread stunt may prove the most lively moment of the auction process as the government sells the 700MHz spectrum freed up by the digital TV switchover - which happens to be a band that suits Telecom, Vodafone and 2degrees respective 4G mobile network upgrades.

So we have an auction where the government is auctioning 45MHz of paired spectrum, with bidders capped at 15MHz (if interest is slow they can jump to 20MHz).

Essentially, that could be thought of as an auction of three identical houses, with three separate bidders.

The government says it wants at least $198 million, or $66 million for each of the three chunks of 15MHz spectrum.

So it won't be much of a bidding war but a managed outcome. The government has already calibrated the amount that constitutes a decent windfall for the Crown, but isn't so high that phone companies slow down their 4G network upgrades, or load up customers with extra charges.

The only point of interest in this "auction", really, is whether 2degrees is willing to pay $66 million for its third, or whether it throws a wobbly and refuses to participate (as Vodafone did across the Tasman).

The mystery - what Tex would do with a truckload of sim cards and bread - has now being solved.

In the final event, he was happy to show up with a token basket at MBIE. A donation is being made to GF Cares, the charitable trust that donates around 180,000 loaves of bread a year to NZ food banks, in lieu of payment for the bread by Mr Edwards.

ckeall@nbr.co.nz

POSTSCRIPT

MBIE spokesman Britton Broun tells NBR late afternoon, "We can confirm that Telecom, Vodafone and 2degrees have paid their deposits (a $5 million Bankers’ Certificate from a NZ registered bank) and are confirmed as registered bidders for the 700MHz spectrum auction. Tex Edwards verbally withdrew his application before registration closed."