UK 4G auction raises $3.61 billion, misses govt target

The UK’s 4G auction has fallen well short of government expectations, raising just £2.34 billion ($3.61 billion) compared with a target of £3.5 billion.

The country’s four existing mobile network operators – EE (Hatfield, UK), Telefonica O2 (Slough, UK), Vodafone (Newbury, UK) and Three (Maidenhead, UK) – all picked up new frequencies, as did fixed-line incumbent BT (London, UK), bidding through its Niche Spectrum Ventures subsidiary.

The UK’s 4G auction has fallen well short of government expectations, raising just £2.34 billion ($3.61 billion) compared with a target of £3.5 billion.

The country’s four existing mobile network operators – EE (Hatfield, UK), Telefonica O2 (Slough, UK), Vodafone (Newbury, UK) and Three (Maidenhead, UK) – all picked up new frequencies, as did fixed-line incumbent BT (London, UK), bidding through its Niche Spectrum Ventures subsidiary.

Three obtained enough spectrum to qualify as the “fourth national wholesaler” that authorities sought, having paid £225 million for 2x5MHz of 800MHz spectrum to add to the 2x15MHz of 1800MHz spectrum it is buying from EE.

Telefonica O2, meanwhile, secured lot A in the 800MHz band – the 2x10MHz concession that requires it to cover 98% of the UK population by the end of 2017 – paying £550 million for the frequencies.

But Vodafone walked off with the biggest gains, spending £791 million on 2x10MHz of 800MHz spectrum, 2x20MHz in the 2.6GHz band and a 25MHz slot of unpaired 2.6GHz airwaves.

Having already launched 4G services using 1800MHz spectrum it owned before the auction began, EE paid £589 million for 2x5MHz of 800MHz and 2x35MHz of 2.6GHz spectrum.

BT’s Niche Spectrum Ventures, the only other auction winner, spent just £186 million on 2.6GHz frequencies, winning 2x15MHz of paired spectrum and 20MHz of unpaired.

MLL Telecom (Marlow, UK) and HKT, a subsidiary of PCCW (Hong Kong), failed to win anything whatsoever.

Government hopes the auction would raise about £3.5 billion had been stoked by a recent 4G auction in the Netherlands whose final proceeds easily beat all expectations.

Having overpaid for its licences, incumbent KPN (The Hague, Netherlands) was forced to slash dividend payments to shareholders in the wake of that process.

Investors in the UK’s operators will be happy that bidding was more restrained, with the overall price per MHz POP working out at $0.23, compared with a whopping $0.85 in the Netherlands.

Although the result will come as a disappointment to the government, Ed Richards, the chief executive of regulatory authority Ofcom, described it as “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.”

Ofcom expects to 4G services to become available from a range of providers within the next six months, and the likes of Telefonica O2, Vodafone and Three will be keen to launch services as soon as possible to prevent EE from extending its 4G lead.

According to Ofcom estimates, the value of the benefits that 4G services provide to consumers over the next ten years will be at least £20 billion.

In December 2013, the regulatory body plans to carry out research to measure the performance of 3G and 4G networks.

“This will be broken down by operator and will assess the average mobile broadband speeds received by 3G and 4G customers,” it said in a statement. “It will be designed to help consumers understand the performance benefits of 4G over 3G mobile services and assist them in making informed purchasing decisions.”

The results of the research will be published in the spring of 2014, says Ofcom.