Ofcom raises £2.3bn in 4G spectrum auction

By Sooraj Shah
20 Feb 2013 View Comments

Communications regulator Ofcom has raised £2.34bn in the much delayed 4G spectrum auction, more than £1bn less than the Office for Budget for Responsibility (OBR) had forecast.

EE already holds 4G spectrum and is currently the only UK mobile operator to offer 4G services to customers. It will now have to pay £588m for the new allotment of spectrum that it has won, which covers both the 800MHz and 2.6GHz bands.

O2, Three and Vodafone were also successful in the auction. O2 will pay £550m for spectrum in the 800MHz band and Vodafone will pay £790m for spectrum in both the 800MHz and 2.6GHz bands. Three will pay £225m for a small amount of spectrum in the 800MHz band.

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Computing revealed last July that BT could enter the 4G spectrum auction, and a subsidiary of the firm, Niche Spectrum Ventures has now won allocation in the 2.6GHz band for which it will pay £186m.

"This spectrum will complement our existing strategy of delivering a range of services using fixed and wireless broadband," said BT chief executive Ian Livingston.

The total amount of money raised will come as a blow for the government, as it estimated in its Autumn statement that the 4G auction would fetch about £3.5bn.

Despite this, Ed Richard, Ofcom's chief executive, believed that this was a "positive outcome".

"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," he said. "We are confident that the UK will be among the most competitive markets in the world for 4G services."

Although the winners have been overjoyed by winning the spectrum, two firms did not win any of the allocation.

Mobile operator PCCW subsidiary HKT and MLL Telecom were both unsuccessful. Gary Marven, CEO at MLL Telecom, was disappointed with the result.

"As a UK-focused telecoms operator and existing spectrum owner we are naturally disappointed not to have won any allocated spectrum," he said in a statement.

"The auction process has helped us analyse different markets and opened up a number of opportunities that we are pursuing. Looking forward we see the allocation of the spectrum through the auction opening the door to increased levels of connectivity and mobility in the UK."

The 4G spectrum auction has been dogged by delays. Postponements were a result of ongoing conflict between the network operators about how and when the auction should take place.

If Ofcom's initial consultation times had been correct, the UK's 4G auction would have begun in the first quarter of 2012.

One of the key debates was whether EE should have been allowed to repurpose its 1800MHz (or 2G) spectrum that it owned in order to provide 4G services before its rivals.

After months of debate, Ofcom declared that it would not distort competition by allowing EE to liberise its 2G spectrum, and EE obliged to launch the 4G network in October 2012.

But the firm's success in 4G has been under scrutiny. Yesterday it revealed a loss of £249m for 2012, and did not disclose how many customers had signed up for its 4G services, suggesting that the mobile operator's head start against its rivals has not yet proved overly successful.

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