The federal government and wireless carriers are poised for a final round of talks to hammer out remaining details on 15-year spectrum license renewals – aiming to bring long-awaited certainty to the industry by the end of 2011.
After a year or more of separate bilateral discussions on the subject between the Commonwealth and the key stakeholders – all tightly locked down via extensive non-disclosure agreements – some industry sources close to the talks are now expecting public announcements on the subject within a couple of weeks. Others are anticipating certainty even sooner. But CommsDay understands that, while the players are drawing close to concluding negotiations on the renewal deals, the final details still remain contingent on the last meetings – set to kick off within days.
With so much at stake for participants, confidentiality around the talks is extremely strict and negotiators are under considerable pressure; the renewal deals are a pivotal element in the plans of both government and carriers. For Vividwireless, the cost of license renewal is a crucial component of the business case for a planned east coast capital fixed wireless rollout, and thus in securing capital to fund that expansion. For Telstra, VHA and Optus, the amount they are obliged to spend on renewing their existing spectrum could partly dictate how much they will be prepared to bid for 700MHz digital dividend spectrum, when that highly coveted asset goes to auction next year. There is also the need for certainty around timeframes, since the existing 15-year licenses are used by the telcos to service existing customers in an environment where wireless bandwidth demands are increasing inexorably.
The federal government, for its part, must strike a balance between extracting optimal value for the renewals and for the 700MHz auctions. This is a particularly key consideration with the government striving to hold onto its promise to return to surplus next fiscal year, having just brought down the surplus forecast to A$1.5 billion in a budget update (against the A$3.5 billion outlined in the May budget) following a $15 billion blowout in its current year deficit.
The Australian Financial Review cited an independent valuation that put the current licenses, collectively, at more than the A$2 billion paid for them when first sold; it tipped the total worth of the digital dividend spectrum at another A$2 billion or higher.
CommsDay understands that spectrum sales proceeds have in fact already been factored into the budget. However, since the transactions are still subject to commercial negotiations, the federal government does not disclose the total amount that it has budgeted to receive, nor whether that figure includes both renewal and anticipated auction revenues.
In March last year, communications minister Stephen Conroy gave key stakeholders a measure of assurance with the notification that renewals would be offered to incumbents who were serving “significant numbers” of Australian consumers or had the networks to do so – alleviating any fears that Telstra, Optus, VHA or Vividwireless (then Unwired) might have had about being forced to go to auction to retain their existing assets.
But key details such as the cost and timing of renewals have taken much longer to bed down, with negotiations continuing throughout this calendar year.