Five winners bring in £2.3 4 billion, £1 billion less than predicted by George Osborne
Ofcom has announced the winners of the 4G mobile spectrum auction, which has raised £2.3 4 billion, £1 billion less than predicted by UK Chancellor of the Exchequer, George Osborne. After more than 50 rounds of bidding, Everything Everywhere, Hutchison 3G UK, Niche Spectrum Ventures (a subsidiary of BT Group), Telefonica UK and Vodafone have all won spectrum.
A total of 250 MHz of spectrum was auctioned in two separate bands; 800 MHz and 2.6 GHz. This is equivalent to two thirds of the radio frequencies currently used by wireless devices such as tablets, smartphones and laptops.
Matthew Howett, telecoms regulation analyst, at Ovum commented: 'Despite all the noise being made about the UK's 4G auction, what you can't hear is the sound of champagne corks popping over at the Treasury as Ofcom's 4G auction fails to raise George Osborne's optimistic expectation of £3.5 billion coming in at £2.34 billion.
'For the mobile operators there must be widespread relief that the amount paid is a mere fraction of the £22.5 billion they were asked to cough up during the 3G licensing process,' continued Howett. 'For them, the fact they didn't have to pay billions more is without doubt a positive thing. The costs of rolling out a network are significant. 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 operator's being left out of pocket after the last auction that they had very little to actually spend on building the network. Things this time should be different, especially given the ability for the 800MHz airwaves to cover large distances and penetrate buildings well.'
The lower frequency 800 MHz band is part of the 'digital dividend' that was freed up when analogue terrestrial TV was switched off, and is ideal for widespread mobile coverage. The higher frequency 2.6 GHz band is ideal for delivering the capacity needed for faster speeds. The availability of the two will allow 4G networks to achieve widespread coverage as well as offering capacity to cope with significant demand in urban centres. Ed Richards, Ofcom Chief Executive, said: 'This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country. We are confident that the UK will be among the most competitive markets in the world for 4G services.
Ofcom has attached a coverage obligation to one of the 800 MHz lots of spectrum, which has been won by Telefonica UK. Telefonica UK has to provide a mobile broadband service for indoor reception to at least 98% of the UK population (expected to cover at least 99% when outdoors) and at least 95% of the population of each of the UK nations – England, Northern Ireland, Scotland and Wales – by the end of 2017 at the latest. On who won what: Telefonica UK won two lots of 10 MHz of 800 MHz, the coverage obligation lot, for £550,000,000. Everything Everywhere has won two lots of 5 MHz of 800 MHz and two lots of 35 MHz of 2.6 GHz spectrum for a base price of £588,876,000. Hutchison 3G UK won two lots of 5 MHz of 800 MHz for £225,000,000. Niche Spectrum Ventures won two times 15 MHz of 2.6 GHz and one lot of 20 MHz of 2.6 GHz (unpaired), at £186,476,000. And Vodafone got two lots of 10 MHz of 800 MHz for £790,761,000. The loosing bids came from MLL Telecom and HKT (UK) Company.
Vodafone UK chief executive Guy Laurence said: 'We've secured the low frequency mobile phone spectrum that will support the launch of our ultra-fast 4G service later this year. It will enable us to deliver services where people really want it, especially indoors. This is great news for our customers. The next generation of mobile internet services will bring real benefits to both consumers and businesses.' While Olaf Swantee, chief executive at EE, said: 'EE is extremely pleased with the outcome of the spectrum auction. Coupled with our existing 1800MHz 4G network, it consolidates our position as the most advanced, largest and most capable 4G operator in the UK.' Commenting on the auction outcome, O2 CEO Ronan Dunne said: 'Today, Telefonica has made a significant investment in next generation 4G technology for the UK. While 4G will indeed allow for faster data speeds and a more seamless mobile experience, it is our intention to go beyond what has already been offered in the market and give our customers a unique and exclusive range of digital experiences, marking a new generation for the mobile industry.
'This is a truly landmark moment for the UK, presenting a wealth of opportunity to transform mainstream services to improve people's lives. Now the investment has been made for 4G to become a nationwide reality, we want all organisations across all sectors to ensure the true value of 4G is realised, so that together we can make Britain truly digital.'
Howett noted: 'Three's ability to win valuable 800MHz spectrum coupled with the spectrum at 1800MHz it acquired from EE before the auction puts it in a strong position to roll out its 4G network. Many customers on Three will have had problems at one point with reception inherent of the propagation characteristics of the 2.1GHz spectrum it currently uses. Other key highlights include the commitment BT has made to rolling out its own 4G services, and O2's lack of higher value spectrum which is needed to meet growing data demands.'
While the main part of the auction has concluded, there is a final stage in the process to determine where in the 800 MHz and 2.6 GHz bands each winning bidder's new spectrum will be located. Bidding in this final stage – called the 'assignment stage' – will take place shortly. Following that stage, once bidders have paid their full licence fees, Ofcom will grant licences to the winners to use the spectrum. Operators will then be able to start rolling out their networks, with consumer services expected in spring or early summer 2013. Howett concluded: 'Despite five years of planning and tens of thousands of pages of consultations, in many ways today is just the beginning. The hard part for operators now comes in convincing us to upgrade and take out 4G mobile subscriptions once services are launched by EE's competitors in late spring/early summer of this year. A lack of detail from EE on how many customers they have tempted over to 4G has led some to believe that consumers just aren't willing to pay more for faster speeds.'