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TMCNet:  Mobile phone groups and Treasury eagerly await outcome of 4G airwave auction

[February 20, 2013]

Mobile phone groups and Treasury eagerly await outcome of 4G airwave auction

(Guardian (UK) Via Acquire Media NewsEdge) The results of the 4G auction - the biggest sale of British airwaves in more than a decade - will be announced today, with mobile phone networks Vodafone, O2 and EE expected to carve up the most valuable spectrum between them.



Telecoms regulator Ofcom will reveal whether the complex auction of mobile internet airwaves has succeeded in raising the pounds 3.5bn that has already been controversially included by George Osborne in this year's budget.

Three, the UK's newest and smallest mobile phone network, is expected to have been outbid on the most valuable bands by its larger rivals, as it has already been in 4G auctions in Italy and Ireland.

Fourth-generation wireless spectrum is intended to connect smartphones to the internet at the same speed as the average broadband landline delivers to personal computers.

The outcome of multiple rounds of bidding for 28 lots over a period of weeks is being determined by secret mathematical algorithms worked out using massive computer processing power.

Ofcom will announce the prices paid and the spectrum bands won by each bidder today. A final auction for any unsold lots will then be held.

Ofcom is selling spectrum in two bands: 800MHz and 2.6GHz. The lower-frequency 800 band will cost more because its longer wavelengths carry signals about 10 times further, making it ideal for extending coverage into rural areas to provide a truly national service. Analysts expect Three to emerge with only 2.6GHz spectrum, with the 800 shared by O2, Vodafone and EE.

Three other bidders - BT, Hong Kong's PCCW and the small British operator MLL Telecom - have bid for 2.6GHz as well, although they are expected to use it for very localised 4G services or to enhance wireless hotspots.

"The importance of this spectrum auction in shaping the future of the UK wireless market cannot be understated," said Daniel Gleeson, mobile analyst at research firm IHS. "Other European spectrum auctions have only seen a maximum of three operators win 800MHz spectrum. The winners will have the bandwidth and range required to keep pace with the boom in mobile data, while the losers will struggle to remain competitive in the mobile market." Should upfront payments for spectrum fail to meet the pounds 3.5bn Office for Budget Responsibility estimate used by the chancellor, the Treasury can still count on a rise in rental fees for spectrum networks already owned.

The new rents have yet to be set and will be the subject of fierce lobbying in coming weeks, with some estimating they could total pounds 700m a year.

(c) 2013 Guardian Newspapers Limited.

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