March 2011 Hong Kong Spectrum Auction: Too little, too late at too high a price…

Hong Kong, 4 March 2011 – Following the Auction of Radio Spectrum held by the Office of the Telecommunications Authority, Telstra International Group’s CSL Limited (CSL) has maintained its significant market leadership in mobile network technology and radio spectrum. CSL has 127.6 MHz of radio spectrum in Hong Kong, 28% more spectrum than any other mobile operator.

CSL’s participated in the March 2011 spectrum auction in an opportunistic way, knowing that it would retain its leadership given the significant amounts of spectrum it already owned no matter what the outcome of the auction could be. CSL withdrew from the auction when it was clear that bids were destroying value.

Radio spectrum is a critical factor in customer experience, at a time when mobile data usage is growing dramatically every month, requiring ever increasing network capacity.

In November 2010, CSL launched in Hong Kong the world’s first LTE / Dual Cell HSPA+ network operating in the 1.8Ghz and 2.6Ghz bands. This award winning network which has been recognized by several international and Hong Kong industry analysts and publications, already covers 87% of the population.

The March 2011 auction sets new value benchmarks for spectrum, with competitors paying roughly 2.5 times the amount that was paid for the 3G spectrum and up to 6.5 times the amount CSL has paid per MHz in the recent January 2009 BWA auction. As a result, CSL is seeing the value of its existing 2G, 3G and 4G spectrum rise significantly.

Tarek Robbiati, Group Managing Director of Telstra International Group and Chairman of CSL added: “This looks likes desperate bidding:  It is interesting to observe that the purchasers of spectrum in this last auction had misjudged the importance of spectrum for LTE in the more strategic 4G Broadband Wireless Auction of January 2009. They seem to have been surprised by the uptake of mobile data, and in order to compensate for their miss two years ago, they have significantly overpaid for narrow bands of spectrum. In an LTE world, delivering a content–rich, compelling customer experience requires large bands of spectrum.  Acquiring 2 x 5mHz of discontinuous spectrum is too little too late at too high a price”.

Mr Robbiati concluded: “In this industry the investment required for fourth generation LTE networks includes spectrum and network capital expenditure. At these price levels paid for spectrum, something has got to give: the pyrrhic winners of the March 2011 auction will have to compromise on their LTE network investment or run the risk to destroy value for their shareholders”.

Media contact: Lucinda Tippett +852 9026 7851

About Telstra International Group:

Headquartered in Hong Kong, the Telstra International Group manages Telstra’s assets outside Australia and New Zealand. These include CSL – Hong Kong’s leading mobile operator, China-based search and advertising businesses and the Telstra International global networks and managed services business.

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