The UK’s 4G auction threw up many surprises and analysts have suggested further spectrum trading could be on the cards as operators emerge from the complex bidding process.
As well as breaking the trend seen in recent European auctions where proceeds…
The UK’s 4G auction threw up many surprises and analysts have suggested further spectrum trading could be on the cards as operators emerge from the complex bidding process.
As well as breaking the trend seen in recent European auctions where proceeds exceeded government expectations, the balance of the amount paid for the 800MHz and 2.6GHz bands was also markedly different compared with elsewhere.
Enders Analysis noted how, compared with Germany, France, Italy and Spain, prices paid in the UK were at the lower end for its 800MHz blocks and at the top end of the range for frequencies in the 2.6GHz band.
The 800MHz digital dividend spectrum offers good coverage with relatively few base stations, whereas 2.6GHz frequencies provide limited coverage but can give extra capacity in high traffic areas.
According to Enders, the apparent difference in appetite for both bands in the UK could be interpreted as operators being confident of accessing a large network of base stations through their infrastructure sharing deals – EE with Hutchison 3G and Vodafone with O2.
Do Hutchison and O2 lack 2.6GHz spectrum?
However, Enders’ James Barford said in the longer term Hutchison 3G and O2 could suffer from their lack of 2.6GHz spectrum, with the latter surprising many by not acquiring any frequencies in this band at all.
“It’s not a problem for O2 in the short term as they have lots of spectral capacity, but in a few years they may start to have an issue,” he said.
Barford pointed to how it is possible to use small cells for 800MHz to manage high traffic areas, but this can be more problematic and expensive compared with 2.6GHz.
When questioned about its lack of 2.6GHz frequencies, a spokesperson for O2 said the company had taken the view that the price of this spectrum had gone beyond the cost of providing extra capacity by other means.
“We have a range of options available to increase capacity on our network, including our wifi investments and the re-use of our existing spectrum for 4G, for which [UK regulator] Ofcom has recently opened a consultation,” said the spokesperson.
Further frequencies will also be released in other auctions over the coming years, for instance when DTT providers such as Freeview are moved onto the currently unused 600MHz band. Another – and possibly faster – option is the opportunity to trade spectrum amongst operators after regulator Ofcom permitted the practice in 2011.
Aetha Consulting partner Amit Nagpal said O2 was “very likely” to be involved in spectrum trading, as well as other opportunities for acquiring new frequencies, to obtain higher end bandwidth.
He said the other surprise from the 4G sale was the large amount of 2.6GHz frequencies that were acquired by fixed line incumbent BT, which has reiterated there are no plans to build a nationwide mobile network.
BT once owned O2’s assets but sold its mobile unit seven years ago to Spain’s Telefonica. According to Nagpal, because of the history and capacity requirements of the two companies, if O2 was going to share or acquire spectrum from a successful 4G bidder then it would most likely be with the fixed line operator.
Spectrum trading does have a precedent in the UK. Last year EE sold a portion of its 1800MHz spectrum to smaller rival Hutchison 3G for an undisclosed sum.
However this was to satisfy European Commission conditions tied to the formation of EE, a joint venture between Deutsche Telekom and France Telecom. As demand for capacity continues to skyrocket, operators will be unwilling to part with their precious spectrum without a significant premium.
A spokesperson for BT said “there are various ways in which we can potentially use the spectrum”, but declined to comment further.
