UK regulator Ofcom has approved mobile operator Everything Everywhere’s request to use existing spectrum for 4G services, drawing criticism from rival telcos.
Following a consultation launched back in March, Ofcom has decided to vary EE’s 1800 MHz…
UK regulator Ofcom has approved mobile operator Everything Everywhere’s request to use existing spectrum for 4G services, drawing criticism from rival telcos.
Following a consultation launched back in March, Ofcom has decided to vary EE’s 1800 MHz licenses to authorise LTE and WiMAX from 11 September 2012, which it states will “deliver significant benefits to consumers”.
A spokesperson for EE, a Deutsche Telekom and France Telecom joint venture, said the decision enables it to launch 4G commercially later this year.
In a statement, Ofcom said: “Although we consider it likely that EE will enjoy a competitive advantage during the period before other operators are able to launch their own LTE services, we consider on the evidence available that any such advantage is unlikely to result in an enduring advantage which distorts competition to the detriment of consumers.”
Ofcom said the move takes into account the release of additional spectrum in the UK’s upcoming 4G auction. It also reflects EE’s obligation to sell some of its 1800 MHz frequencies this year to satisfy European Commission conditions that are tied to its approval for the creation of the JV back in 2010.
Criticism from rival operators
The regulator’s March consultation received 16 responses and, as expected, its ruling attracted criticism from rival mobile operators Vodafone, O2 and Three.
“We are frankly shocked that Ofcom has reached this decision,” said a spokesperson for Vodafone.
“The regulator has shown a careless disregard for the best interests of consumers, businesses and the wider economy through its refusal to properly regard the competitive distortion created by allowing one operator to run services before the ground has been laid for a fully competitive 4G market.”
Spectrum sale to Three imminent
The spokesperson also questioned the timing of the announcement, as reports state EE is close to selling the 1800 MHz frequencies it is required to divest to Three, the UK’s smallest operator and likely favourite for the deal.
TelecomFinance understands that Three could announce it is in exclusive talks for the spectrum as early as today.
(21 August 16:40 UPDATE: EE sells 4G spectrum to Three)
Ofcom’s ruling applies across all of EE’s 1800MHz spectrum, including the 2×15 MHz it is required to divest this year. This means the UK could see two 4G networks up and running before the country’s main auction, according to Informa analyst Thomas Wehmeier.
However, EE is not obligated to clear the spectrum for its buyer’s use until October 2013. It remains to be seen whether the group can be persuaded to release the frequencies before then, likely in the form of a significant premium on the sale.
EE and Three declined to comment on the spectrum sale, which is being managed by Morgan Stanley.
Wehmeier added: “But as is always the risk in the fiercely competitive and litigation-prone UK market, it’s possible that Ofcom’s decision could be delayed by legal challenges.
“The risk for the UK’s other mobile operators is that dragging this through the courts could serve only to further delay the timing of the upcoming auction and thereby pause their own plans to launch 4G.”
Analysys Mason analyst Morgan Mullooly believes Ofcom’s decision gives EE a first mover advantage of at least three months, and the regulator could have been more judicious and allowed the so-called refarming after the auction.
“The unexpectedness of this decision is compounded in light of the litigious cloud that has been hanging over UK spectrum policy making since LTE first came onto the agenda,” said Mullooly.
