March will see an auction for 16 5G spectrum blocks in the 3.5GHz band. Spectrum auctions are usually for 20-year licences. In this round the licences on sale will only be for two years. The short licence term buys the government time to reach a settlement with iwi over an outstanding Treaty of Waitangi claim.

Each of the 16 10MHz blocks has a reserve price of $250,000. Bidders will need to deposit $500,000 to take part. If everything sells at the reserve price, the government will raise $4 million. Prices can go 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. Licence terms start later this year and finish at the end of October 22. 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 will affect Vodafone the most. It could see its existing 3.5GHz holding 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.

For that to happen in the March spectrum auction there would need to be more bidders than New Zealand's three existing mobile carriers. Dense Air, which owns 70MHz of 2.5GHz spectrum that it bought in 2018, is a potential fourth bidder.

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