The UK’s 4G auction raised more than £1bn less than government expectations, racking up just £2.34bn in proceeds from existing mobile operators and fixed line incumbent BT.
The country’s chancellor had budgeted for £3.5bn from the sale of 800MHz…
The UK’s 4G auction raised more than £1bn less than government expectations, racking up just £2.34bn in proceeds from existing mobile operators and fixed line incumbent BT.
The country’s chancellor had budgeted for £3.5bn from the sale of 800MHz and 2.6GHz frequencies, which had a reserve price of £1.3bn. In falling short of this amount, the UK broke the trend seen in recent auctions in Ireland and the Netherlands where proceeds exceeded expectations.
Winning bidders must now take part in another auction process that will decide where in the spectrum band their blocks of new frequencies will be located. However, analysts do not expect this process will significantly add to overall proceeds.
UK-based Vodafone spent the most in the 4G auction, paying around £791m to acquire 2x10MHz of 800MHz digital dividend spectrum, and 2x20MHz of paired 2.6GHz and 1x25GHz of unpaired 2.6GHz frequencies.
France Telecom/Deutsche Telekom JV EE, which through telecoms licence amendments last year already operates a 4G network, bought 2x5MHz of 800MHz spectrum and 2x35MHz of 2.6GHz frequencies for roughly £589m.
Spain’s Telefonica spent £550m to acquire the 2x10MHz of 800MHz spectrum that is tied to coverage requirements, meaning by 2017 it must provide mobile broadband services for indoor reception to at least 98% of the UK population.
Propped up by auction rules designed to encourage a fourth viable 4G player, Hong Kong’s Hutchison 3G UK paid £225m for 2x5MHz of 800MHz spectrum.
BT, which has repeated it has no intention of building a national mobile network, acquired 2x15MHz of 2.6GHz paired spectrum and 1x20MHz of unpaired 2.6GHz spectrum for around £187m. In a statement, BT CEO Ian Livingston outlined how the frequencies will be used to complement its services in fixed and wireless broadband.
Despite registering to take part in the 4G bidding, Hong Kong conglomerate PCCW and UK managed services provider MLL Telecom did not pick up any 4G frequencies.
Ed Richards, the CEO of regulator telecoms Ofcom, said that after 50 rounds of bidding he was confident that the auction’s result will see the UK become one of the most competitive 4G markets in the world.
“4G coverage will extend far beyond that of existing 3G services, covering 98% of the UK population indoors – and even more when outdoors – which is good news for parts of the country currently underserved by mobile broadband,” he said.
Mobile operators will also be relieved that the amount they paid in the auction was a fraction of the £22.5bn spent during the sale of 3G frequencies in 2000.
Ovum analyst Matthew Howett noted that, with the costs of deploying nationwide networks being notoriously high, this could help operators accelerate their 4G rollouts.
“It could be argued that the relatively poor 3G coverage we have seen in the UK up until now is at least partially a result of operators being left out of pocket after the last auction that they had very little to actually spend on building the network,” he said.
“Things this time should be different, especially given the ability for the 800MHz airwaves to cover large distances and penetrate buildings well.”
But the lower than expected 4G proceeds is a blow to the UK chancellor George Osborne who, using data from the independent Office for Budget Responsibility (OBR), had already drawn up spending plans for an anticipated £3.5bn.
The fact that the 4G sale missed this target did not come as a surprise to some, however, with Aetha Consulting partner Amit Nagpal predicting at the TelecomFinance 2013 conference in January that proceeds would be £2.5bn-£2.6bn.
Nagpal said at the time that he was very surprised by the OBR’s forecast, and that there were many geographical reasons why 4G auctions elsewhere reached the £3.5bn mark that did not apply to the UK.
Ofcom said it plans to shortly launch the final phase of the auction, the assessment stage, with operators expected to roll out new commercial services in spring or early summer.
