Communications and Information Technology Minister Amy Adams has today announced the timing, reserve price, and implementation conditions for the upcoming auction of the digital dividend radio spectrum.

The allocation of the 700 MHz band of spectrum will allow the building of fourth generation (4G) mobile networks using the spectrum freed up by the switchover to digital television.

The auction is scheduled to start on 29 October 2013.  The start date will be confirmed after completion of the bidder registration process.

The reserve price for each of the nine lots of 5 MHz paired has been set at $22 million.

The Government has spent $157 million clearing the 700 MHz band to allow the spectrum to be used for 4G mobile networks.

“In setting the reserve price, we have balanced generating a fair return on the sale of the spectrum rights with the significant investment required by mobile network operators to build the 4G network infrastructure,” Ms Adams says.

“The reserve price also takes into account the value to New Zealand of having 4G connectivity widely deployed.”

The auction terms will provide a deferred payment option for successful bidders over five years, subject to payment of a commercial interest rate.

“Allowing staged payment will enable mobile network operators to invest immediately in building their 4G networks to increase their service to New Zealanders.”

The auction conditions also include requirements for mobile network operators to upgrade their existing rural cell sites to 4G capability within five years, and for successful bidders to continue expanding cellular coverage.

“These requirements are designed to ensure that at least 90 per cent of New Zealanders have access to a 4G network and faster mobile broadband coverage within five years.

“The use of mobile broadband services is growing at an enormous rate in New Zealand. Fast, reliable access to mobile broadband is enabling improvements in productivity and ease of business, and providing new applications for consumers.

“Indications are that by using the spectrum for 4G mobile networks, we can expect economic benefits for New Zealand of up to $2.4 billion over the next twenty years.”

Further auction information:

Management rights for nine lots of 2x5 MHz in the 700 MHz range will be auctioned.  The management rights will begin on 1 January 2014 and last for 18 years. 

Bidders will initially be limited to acquiring a maximum of three lots each.  If some lots remain unsold after the initial auction round closes, the limit may be increased to four.

Successful bidders who acquire three or more lots will be required to build a number of new cell sites in areas that do not currently have any mobile coverage. 

Bidders who acquire three lots must build at least five new cell sites each year, for five years.  For any bidders who win four lots, the requirement increases to ten new cell sites each year for five years.

The Government also wishes to ensure new or non-cellular operators are able to participate.  For the 700 MHz auction, different implementation conditions have been set for successful bidders without an existing mobile network. 

These bidders will have five years to deploy services to at least 50 per cent of New Zealanders.

To ensure that rural communities also benefit from the new technology, existing cellular operators buying the 700 MHz spectrum will be required to upgrade at least 75 per cent of their existing rural 2G and 3G cell sites to 4G capability using the 700 MHz spectrum within five years, up to a maximum of 300 cell sites. 

Bidders choosing to pay in instalments will be required to pay a commercial interest rate and provide appropriate security.

The Ministry of Business Innovation and Employment will be running the auction.  It will provide further details for prospective bidders shortly.

Bidders will be required to register and provide a deposit before the auction.  The bidder registration is likely to open on 11 September 2013.