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Telstra protects its investment

Recently Telstra (ASX: TLS) and Optus, owned by Singapore Telecommunications (ASX: SGT), invested $1.3 billion and $649 million, respectively, for wireless spectrum licenses.

Telstra and Optus were alone in their purchases of the 700 MHz spectrum as Vodafone, owned by Hutchison Telecommunications Australia (ASX: HTA), did not participate. Vodafone now believes the unsold blocks of the 700 MHz frequency should be sold cheaper because they have already given Telstra and Optus the advantage in purchasing first.

The auctions failed to raise the intended revenue but according to The Australian, former communications minister Stephen Conroy told ACMA that a decision was needed by September 1 to determine the “appropriate procedures” for selling the rest of spectrum blocks. He also said that the reserve price at the auctions would have to remain the same.

Telstra said that the prices set at auction must be upheld to ensure “confidence in the industry as it continues to invest in mobile markets”. It believes that Vodafone should have to pay the same minimum price that Telstra and Optus were forced to pay. “It is also important for maintaining the integrity of the recent auction process”.

Optus thinks the remaining 700MHz frequency should be held until 2017 and then reallocated after the current spectrums have been commercially tested. This would be perfect for both Telstra and Optus, as they seek to capitalise on their initial purchases.

Foolish takeaway

Investors know that Telstra is a good long-term stock that pays great dividends and could fit into almost any portfolio. Singapore Telecommunications is Australia’s number-two mobile provider and Singapore’s biggest telecom. Long-term investors could see value in the provider, although it seems fairly priced for any short-term gains. Hutchison Australia’s share price has been hit hard in recent years thanks to poor performance by its mobile network and poor management. However, shareholders would be hoping the worst is behind them and the company’s new 4G network can begin to attract more customers away from its bigger rivals.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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