Unwired, Austar Swap Spectrum

Austar and Unwired Group announced spectrum swap deal for broadband wireless; Unwired secures loan to finance deal

July 7, 2005

4 Min Read

SYDNEY, Australia -- AUSTAR (ASX:AUN) and Unwired Group Limited (ASX:UNW) today announced a spectrumswap deal that is designed to deliver interoperable wireless broadband services in bothmetropolitan and regional Australia, as their networks are rolled out.Under the agreement, AUSTAR will trade a portion of its 2.3GHz spectrum licences to Unwired.

Unwired will trade a portion of its 3.5GHz spectrum licences to AUSTAR and the licenceboundaries will be redrawn with new licences issued. Unwired will also make a supplementarycash payment to AUSTAR of $15 million. As a result, the agreement would see AUSTARholding 2.3GHz and 3.5GHz licences in areas that roughly align with its current subscriptiontelevision market in regional Australia, whilst Unwired would hold the 2.3GHz and 3.5GHzlicences for the majority of metropolitan Australia.The 2.3GHz and 3.5GHz spectrum bands are at the core of the planned WiMAX standard.

Unwired and AUSTAR have agreed to ensure that any new network rollout would be compatiblewith the new standard, capitalising on the real opportunities presented by interoperable, longrange,mobile broadband.

AUSTAR CEO Mr John Porter said, “Our arrangement with Unwired is great news for the futureof broadband services in regional Australia. By rationalising our spectrum holdings into ourregional markets, AUSTAR will be in a position to develop plans to launch a broadband service,which is a logical extension of our core business.

“We have spent the last 10 years building a business that specialises in dealing with regionalAustralian needs, from our television service to mobile and dial-up internet services. Wirelessbroadband is ideally suited to regional markets, and we want to build on our well establishedbrand and operational capabilities to serve our regional customers.”Unwired Chairman Mr Peter Shore said, “The beauty of building WiMAX-compliant networks isinteroperability. As the networks are rolled out, Unwired would be able to sell a national serviceto all regions where AUSTAR builds its network, in addition to its own city network and services,enabling Unwired wireless broadband customers to roam seamlessly from city to country andvice versa.

“Central to this deal is the realisation of true competition in the telecommunications sector.Unwired is Australia’s fastest growing wireless broadband provider and this alliance enablesUnwired to focus on the delivery of wireless broadband to most of the capital cities and majormetropolitan areas. Our motivation has always been to ensure both companies play to theirstrengths to the ultimate benefit of the customer in pricing, performance and future potential.“AUSTAR and Unwired will now be the Australian champions of WiMAX in their respectivemarkets, enabling their customers to roam nationally and, ultimately, internationally with theimminent ratification of the WiMAX mobile standard. WiMAX will revolutionise broadband anddata access in much the same way as the GSM standard transformed voice and its associatedtechnologies.”

Mr Porter said that this deal presents the opportunity for regional Australians to gain access tocutting-edge technology at the same time as their metropolitan counterparts. “We are lookingforward to finalising our business case and rollout plans and sharing those with the market indue course. With analysts predicting that wireless broadband will grow at three times the pace ofthe overall broadband market in 2005, AUSTAR wants to ensure that regional Australians will beamong those making the leap to this great service.”

In a separate release:

SYDNEY -- Unwired Australia (ASX:UNW) announces today it has entered into an agreement withAllco Finance for a $15.7million secured loan to finance the AUSTAR spectrum swap dealalso announced today.

Unwired is already fully funded to take its business through to positive cash flow inSydney. This medium term loan enables Unwired to enter into the spectrum swaparrangements with AUSTAR, which will give Unwired the important 2.3GHz and 3.5GHzlicences in most of the major metropolitan centres in Australia, without any impact on theSydney business. Unwired has previously announced that it is in negotiations with anumber of major parties regarding funding arrangements to complete its national rollout.

The WiMAX-enabled 2.3GHz and 3.5GHz spectrum licences will allow Unwired to focus onthe introduction of wireless broadband into the capital cities and major metropolitancentres, including Sydney, Newcastle, Melbourne, Geelong, Canberra, Brisbane, Adelaideand Perth. Unwired’s coverage area represents approximately two thirds of Australia’spopulation.

Unwired CEO David Spence said, “This funding gives us the flexibility to own the spectrumwe need in the areas of most interest to us in our build out. Instead of spending $50millionto acquire the 2.3GHz spectrum nationally, with the spectrum swap we are able toconcentrate on the centres of population to build the scale of business we want for only$15million, thereby decreasing our future funding needs for roll-out in other metropolitanmarkets. It also removes the current $3million p.a. 2.3GHz spectrum lease cost we areincurring. This loan is repayable at any time at Unwired’s discretion without penalty. Wehave chosen a debt funding facility as we think it is an attractive option at this stage and isin the best interests of Unwired’s shareholders.

Unwired Australia Pty. Ltd.

Austar United Communications

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