Foreign spectrum sales throw UK issues into sharp relief

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Fears UK is falling behind as spectrum auctions in India and Germany raise huge sums

India recently closed its 34-day auction of airwaves to allow private players to start 3G telecom services in the country, with the Indian government set to gain a little under 700 billion rupees (£10.5bn).

Successful bidders are expected to pay around 170 billion rupees (£2.5bn), vastly surpassing the reserve price of 35 billion rupees (£434.1m).

In Germany, the recent 41 frequency block spectrum auction generated €4.4 billion (£3.7bn) for regulator BNA, with Vodafone spending €1.42 billion (£1.19bn), followed by Telefónica O2 with €1.38 billion (£1.16bn), Deutsche Telekom with €1.3billion (£1.09bn) and Royal KPN with €283.6 million (£238.5m).

Although the final fee for German spectrum was less than expected, IHS Global Insight telecom analyst Aapo Markkanen said the result should be considered with a view of BNA freeing up more frequencies for data services in the 900MHz band next year.

More importantly though, the total included €3.6 billion (£3.02bn), or 82 per cent of the combined total, for the six allocated blocks in the 800MHz band – the digital dividend. Vodafone,  Telefónica O2 and Deutsche Telekom won two 800MHz blocks each.

“The accumulated proceeds are clearly in the lower end of most industry estimates, which due to the lack of an earlier benchmark varied quite wildly in the first place, with a span from €2 billion to €8 billion,” said Markkanen.

“In our view, the total sum out of the digital dividend is a rather realistic outcome, given that Germany may probably next year free up the technically very similar 900MHz band, at the moment reserved for voice services, for mobile data.”

Markkanen added the German auction will act as a benchmark for future 800MHz sales across Europe, although CCS Insight’s director of operator strategy, applications and content Paolo Pescatore was more sceptical of the level of investment to be seen in the spectrum in the UK.

“This is a higher band that was vacated by broadcasters and is where much of the attention in Germany was focussed,” Pescatore said.

“You can expect the same level of attention in the UK as broadcasters move over to digital, but we won’t see the same level of investment in the UK as we did in 3G. There was evidence of that in Germany, which is a similar market in terms of size. It will be a more modest investment this time.”

Full article in Mobile News issue 465 (June 7, 2010).

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