August 23, 2012

4G Auction Could Scoop £3bn-4bn say Analysts

4G Auction Could Scoop £3bn-4bn say Analysts

4G Auction Could Scoop £3bn-4bn say Analysts

Analysts of the Telecom industry predict the upcoming auction of 2.6Ghz and 800Mhz spectrum will make up to £4bn for the UK exchequer, far less than the £22bn that was raised by 200’s 3G auction.


The rules for the 4G auction were released by telecoms regulator Ofcom today (24 July 2012).


Director in PwC’s Valuations team, Simon Harris, said: ‘The reserve prices implemented will generate at least £1.4bn for the Exchequer from the auction, but we expect demand for this prime real estate of the airwaves to drive prices up to £3bn – £4bn in line with our previous expectations.’ He said operators’ desire for sub-1GHz spectrum would be a ‘key driver’.


Practice Leader, Regulation and Policy, at analyst Ovum, Matthew Howett, commented: ‘Given the insatiable appetite for data from consumers in the UK, we can be quite certain that it will be a hotly contested auction with all players keen to ensure they get adequate spectrum to support further growth in demand.’


Because the UK lags behind Europe when it comes to this new technology, ShaunCollins at industry analysts, CCS insight, said operators had to set aside any concerns and commit to the auction process in order to get 4G delivered to the UK as quickly as possible.


The 4G auction will see 250MHz of spectrum up for grabs – that’s the equivalent of three-quarters of the mobile spectrum being used currently – and 80% greater than that offered in 2000’s 3G auction.


Ed Richards, CEO of Ofcom, said the auction has been designed to ‘deliver the maximum possible benefit to consumers and citizens across the UK’.


He said that the measures Ofcom is introducing would enable UK consumers to browse the web, download email attachments and stream video on mobile devices ‘from almost every home in the UK’.

Ofcom has set aside 800MHz spectrum for a fourth contender, in order to ensure a balanced distribution and encourage competition. The fourth operator may be Three UK, or a new contender such as Virgin or BT.


Collins applauded Ofcom for sticking to its guns on the rules for the auction and said that Ofcom’s announcement ‘opens the door for a new entrant to join the existing established players, particularly given the price limits on the lower frequencies, which look modest compared to the price of spectrum elsewhere in Europe’. He said likely bidders could include BSkyB, Virgin Media, Bt and TalkTalk.


He hadn’t that Google couldn’t be ruled out of the competition, although it was unlikely – and that the frontrunner for the fourth spot was likely to be Three along with its parent company Hutchison Whampoa.


Ovum’s Howett also thought a new entrant was unlikely and that Ofcom was effectively reserving the fourth chunk of spectrum for Three.


Ofcom’s Richards told journalists that the request by Everything Everywhere to utilise some of its 1800MHz spectrum for 4G was a separate matter, and that Ofcom would make a decision on this in the next weeks or months, and it could certainly be expected before the end of 2012.


One buyer in the auction will have to offer indoor coverage to 98% of the UK population as part of the requirement of their purchase.

Howett said this would see 2Mbps mobile broadband on offer to almost all of the UK population by the end of 2017. He said it would also improve outdoor coverage, but may see some areas only being able to choose from one provider.


PwC’s Potterill said this was an important matter as it is the households in the last few areas that are hard and expensive to reach – they are generally in rural areas, so this would ‘provide a welcome boost to rural broadband’. Collins, however, said the move was bad news for rural areas. ‘There appears to be no mandate for rolling out 4G in rural areas with just one licence having a minimum coverage requirement.’ He said all licences should be obliged to roll out in smaller towns and villages as they have in Germany ‘where the regulator has used 4G as a means of closing the broadband access gap’.