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Telcowatch says Vodafone is New Zealand’s mobile market leader.

There’s not much in it. Vodafone is one percent ahead of Spark on 36 percent.

The two were neck and neck for most of last year.

While the lead is real, it’s not dramatic.

Nor is it the whole picture. The way Telcowatch measures the market means that Spark’s Skinny business is counted separately from its parent company.

Adding that back into Spark’s figure puts the company well ahead of Vodafone with a 41 percent market share.

Telcowatch monthly market share 2018 - 2019

However you crunch the numbers both Spark and Vodafone have a clear lead on 2degrees. The third mobile carrier’s market share is stable at 23 percent. That makes it a little over half the size of Vodafone and Spark.

That’s a respectable showing for the youngest mobile carrier which entered a market that was almost at saturation point. And there is no question 2degrees has reshaped the market.

It probably suits everyone concerned to count Skinny as a seperate business.

Yet Skinny is definitely a Spark brand.

When Skinny started it was more distinct from its parent than it now is.

Today Skinny’s product alignment can be seen as rounding out Spark’s offerings. It’s a no-frills version. In supermarket terms it is PaknSave to Spark’s New World.

The two share the same network infrastructure. Skinny employees may be loyal to the brand, but they are Spark employees. Spark’s management decides Skinny’s strategy.

Skinny remains the smallest of the four brands. In December its market share was 5.6 percent. It has been between roughly five and six percent for the last couple of years.

The most interesting aspect of the recent report from Telcowatch is not the interplay between Spark and Vodafone, but the way Skinny has been growing its market share at the expense of the parent company.

Over the last year Skinny is the best performer in terms of market share growth. It has grown gradually.

It’s not hard to understand why. Despite all the fuss about 5G, the mobile phone market is mature. There’s less differentiation between brands and less of a premium in Spark’s brand when compared to Skinny.

There is, however, a considerable price difference. Slowly, but surely, customers are waking up to this. You can buy what amounts to the same mobile experience for less money. The big surprise is that more people have yet to realise this.

In March, New Zealand’s government will auction 16 10MHz blocks of spectrum in the 3.5GHz band.

It’s an unusual spectrum auction. Most past spectrum auctions in New Zealand have been for 20-year licences. This time, the licences are for two years.

The reason for this is that the industry is pressuring government to release the spectrum they need for 5G mobile services.

Treaty claims

At the same time, the government has yet to reach a Treaty of Waitangi settlement with iwi over spectrum. Selling short-term licences buys time to complete negotiations.

Each of the 16 10MHz blocks has a reserve price of $250,000. Bidders need to deposit $500,000 to take part in the auction.

If everything sells at the reserve price, the government will raise $4 million. Prices can go higher. The last time spectrum was auctioned prices went much higher.

No single bidder will be able to buy more than four blocks in the first auction round. This is less than the 80MHz to 100MHz recommended for full 5G services by the GSMA, an international mobile operator trade association.

The rights are not tradable, are nationwide and buyers must use them for 5G mobile services.

More spectrum later

Licence terms start later this year and finish at the end of October 2022. The government will hold a further, long-term auction for the spectrum that year. The government says it expects to free up more spectrum later.

Bidders in the March auction will have to return existing 3.5GHz management rights to the government.

This affects Vodafone more than any other carrier. It is possible Vodafone’s existing 3.5MHz holding will fall. Returning existing spectrum will help flatten the playing field. There will be a refund for returned management rights.

Radio Spectrum Management, part of the Ministry of Business, Innovation and Employment, will use a simplified version’s of a combinatorial clock auction. In effect, this starts with the seller offering blocks at the reserve price. If the demand for blocks is greater than the supply, it increases the price.

Beyond the three mobile carriers

New Zealand has three existing mobile networks. There are 16 spectrum blocks on sale and each bidder can buy four in the first auction round. That means the government expects a fourth buyer to enter the auction.

This is a departure. The earlier auction for 700 MHz band spectrum was tailored to cater for the three mobile carriers; Spark, Vodafone and 2degrees.

The obvious candidate is Dense Air. The company owns 70 MHz of 2.5 GHz spectrum. At the moment Dense Air acts as a wholesaler to the mobile carriers. Spark’s tiny South Island fixed wireless broadband 5G project uses Dense Air spectrum.

Other parties may be interested in the spectrum. Few of New Zealand’s Wisps1 could afford the $500,000 deposit or the $250,000 per block asking price. Yet if they were to act collectively a bit might be possible.

If the government doesn’t sell all 16 lots in the first auction round, it may offer them to existing bidders.

Given that the amount of spectrum being auctioned is not enough for carriers to offer a full blown 5G service, it looks as if will be some time before New Zealand gets all the benefits of the technology. There’s enough bandwidth for fast data speeds, but, as things stand, maybe not enough for carriers to deliver the gigabit plus speeds 5G hype has promised.


  1. Wisps are small, local wireless internet service providers. They cover rural and remote gaps in markets not served or poorly served by bigger telcos. ↩︎

IDC thinks the PC market ended 2019 on an ‘impressive’ note. Gartner’s press release talks of the “First sign of growth for worldwide PC shipments after seven consecutive years of decline“.

The numbers don’t lie. Both research companies noted a small uptick in PC sales. Yet it isn’t time to break out the champagne.

First, the uptick isn’t that great. IDC clocks fourth quarter growth at 4.8 percent year-on-year. Gartner puts the number at 2.3 percent.

These are by no means strong numbers. Gartner’s growth figure for the calendar year is only 0.6 percent. They are best thought of as ‘less awful’.

We have, after all, seen seven straight years of falling PC sales. In 2011 Gartner recorded total sales of 352 million units. The number for 2019 was 262 million. That’s a 25 percent drop in eight year. Last year’s growth is small in comparison.

IDC’s numbers of the same period fell from 371 to 266 million. That’s a fall of 28 percent.

 

There’s another reason the reported increase in sales is less reason to celebrate.

Many of the extra sales in late 2019 come because Microsoft’s support for Windows 7 is about to end. Many users need to upgrade their hardware to move to Windows 10. Sure, it isn’t always essential, but upgrading to new hardware simplifies the change.

There was also a shortage of Intel processor chips late last year. Deliveries have only recently recovered.

In other words, special factors account for all the increase in PC sales. And let’s face it, low single digit growth is unimpressive at the best of times.

Almost all the increase in sales is for business models. Interest in consumer PCs continues to decline.

Another trend the sales reports have picked up is the increased dominance of the top PC brands. Lenovo, HP and Dell all added market share at the expense of other brands. Between them they account for around two-thirds of all units sold.

Meanwhile Apple’s unit sales headed in the opposite direction. After years of picking up market share at the expense of the Windows PC brands, Mac sales fell a little. Apple’s share of the total market has fallen from 7.9 percent to 7.5 percent.

America is leaning hard on Britain to reject Huawei as a 5G network builder. Meanwhile all the parties in New Zealand have gone quiet on the subject.

US officials told British ministers using Huawei in UK 5G networks puts intelligence sharing at risk. According to a report in the Guardian, the Americans said it would be “Nothing short of madness”.

Former Australian prime minister Malcolm Turnbull also warned the UK prime minister on the matter.

He says: “The real question is not looking for a smoking gun but asking whether this is a loaded gun and whether you want to have that risk.”

Threat seen in Australia

The threat identified by Australian security agencies was not Chinese intelligence interception but potential denial of network access.

Turnbull told The South China Morning Post: “Australia banned Huawei and ZTE from its 5G network as a hedge against adverse contingencies in case relations with China soured in the future.”

Elsewhere in a video he says:

“Capability takes a long time to put in place. Intent can change in a heartbeat, so, you have got to hedge and take into account the risk that intent can change in the years ahead.”

Malcolm Turnbull – Former Australian Prime Minister

Turnbull says Australia reached this decision without pressure from the US. That may be true, but it stretches credibility to suggest there was no lobbying. Even more so when you read the stories about US officials warning British ministers.

New Zealand may have also arrived at its own conclusions, but again, there will have been lobbying on both sides. And, at the very least, our politicians will be aware of The Australian decision.

Huawei locked out

For now, Huawei remains locked out of building a 5G network in New Zealand.

That was never going to affect Vodafone who built the first serious 5G network here. Nokia has been Vodafone’s long-term partner and has most of the 5G contracts.

It’s different for Spark and 2degrees. While 2degrees has announced nothing about its 5G plans, Spark has made a lot of noise over the last two years.

Until now, Huawei has been Spark’s main partner. The two built one of the world’s first 4.5G networks. For a long time it looked as if Huawei was on track to build Spark’s 5G network.

TICSA

That now seems remote. On paper the door is still open. The two companies could still get the necessary sign-off under the Telecommunications (Interception Capability and Security) Act 2013. This is betterknown as TICSA.

The GCSB blocked Spark’s original 2018 5G upgrade proposal under the Act. At the time it said the proposal posed a “significant network security risk.”

Ministers have been careful to avoid talking of an outright ban. They say the GCSB judges each TICSA application on its merits. Officially it just happens that the proposed application wasn’t up to the standard.

Spark and Huawei could return with a fresh proposal. At times it sounds as if the government expected this to happen. Yet the first application was more than a year ago and there has been no word of a fresh attempt.

Otherwise New Zealand’s government has said little more about the affair in public. It doesn’t need to.

White House claims Huawei spies

Other governments are making plenty of noise. The US and the White House has maintained all along that Huawei spies for the Chinese government. Huawei has been adamant that it does not.

As Turnbull makes clear, Australia remains cautious.

In Huawei’s defence there is no evidence of any wrong doing. Nor is there a Chinese law in place that obliges Huawei to act on the government’s behalf. Nor is China seen as a likely aggressor. As far as diplomats, exporters and importers are concerned we are all the best of friends.

Yet, as Turnbull makes clear, there doesn’t need to be evidence of spying for there to be a potential future risk. Nor does there need to be a change in Chinese law. If tensions between the West and China ramp up, China could put Huawei under pressure.

As Turnbull points out, circumstances can change fast. Building a network, or an alternative network takes a lot of time and money. His point is not choosing Huawei is prudent.

Decision time in London

It’s not clear yet which way the UK will jump. It could still decide to go ahead with Huawei. Huawei’s prices are cheaper than rival network hardware companies.1 Huawei hardware is often the better choice for reasons other than money.

The problem the UK faces is much the same as the one facing New Zealand. Allow Huawei and there will be a diplomatic fall-out with the US. Shut Huawei out and China will take offence. There’s no fence sitting, nations are being forced to choose one or the other.

China has not helped matters. Since the question first arose, it has flexed its muscle in ways that alarm overseas observers. Hong Kong is the most obvious example.

One way or another New Zealand appears to have made a decision. Spark is pushing ahead with alternatives to Huawei with its 5G projects.

It will be interesting to see if New Zealand’s position changes if the UK give Huawei the green light. It may not. Yet a decision in Huawei’s favour will give the company ammunition in future New Zealand discussions.

A story unfolding on the other side of the world could yet have implications here.


  1. Some argue the Chinese government subsidises the business. If true, that is more, not less, reason to be wary. ↩︎