News: UPDATE 1-Australia's TPG Telecom starts $1.4 bln network, Telstra shares fall

(Recasts on Telstra impact)

SYDNEY, April 12 (Reuters) - Australia's TPG Telecom Ltd (TPM) said it will spend A$1.9 billion ($1.4 billion) building a 4G mobile phone network after winning a government auction for airspace, sending shares in dominant rival Telstra Corp Ltd (TLS) to a five-year low.

The Australian Communications and Media Authority, which ran the sale of broadcast spectrum freed up since television stations went digital, said TPG would pay A$1.26 billion for two 10 MHz bands of airspace in the 700 MHz range sought by 4G mobile providers.

Vodafone would pay another A$286 million for two 5 MHz bands, ACMA added, taking the total sale price to about A$1.5 billion, well over the A$857 million reserve.

While Vodafone already has a 4G network, the sale enables TPG to build a network from scratch, creating a new rival in a market in which Telstra has said it wants to grow earnings as its traditional fixed-line business experiences sustained decline.

TPG added that it will spend A$600 million building the network over three years.

Shares of Telstra, which was not allowed to bid in the auction because of its dominant market position, were down 6 percent in morning trading, hitting their lowest level since 2012. ($1 = 1.3330 Australian dollars)