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4G Auction, 5 winners, Osbourne lost

 Posted by on 20 Feb 13  Categories: Business, Technology
Feb 202013
 

Mobile Phone Mast

photo credit: Micky.! via photopin cc

Ofcom have announced the result of the 4G auction. 5 operators have won spectrum for 4G in the auction and have paid a total of £2.34bn.

The Chancellor, George Osborne, will be disappointed because he controversially included a forecast of £3.5bn in his Autumn Statement 2012. The Chancellor was using a forecast supplied by the independent Office for Budget Responsibility (OBR) so to be fair it is not the Chancellor’s error. However, George Osbourne used the forecast £3.5bn to announce that the deficit would unexpectedly fall in his Autumn Statement. This was politically useful for George Osbourne at the time but since it was only a forecast there was always the risk that the actual would be less that the forecast. And that is what has happened so I assume that Labour will be getting ready to score political points over the next few days.

The winning operators are:

  • Vodafone Ltd have won 2 x 10 MHz of 800 MHz, 2 x 20 MHz of 2.6 GHz and 1 x 25 MHz of 2.6 GHz at a cost of £790,761,000
  • Everything Everywhere Ltd (who own the Orange and T-Mobile brands) has won 2 x 5 MHz of 800 MHz and 2 x 35 MHz of 2.6 GHz at a cost of £588,876,000
  • Telefónica UK Ltd (who own the O2 brand) have won 2 x 10 MHz of 800 MHz at a cost of £550,000,000. This spectrum includes an obligation to provide indoor 4G coverage to at least 98% of the UK population by the end of 2017.
  • Hutchison 3G UK Ltd (who own the Three brand) have won 2 x 5 MHz of 800 MHz at a cost of £225,000,000
  • Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc) have won 2 x 15 MHz of 2.6 GHz and 1 x 20 MHz of 2.6 GHz at a cost of £186,476,000

Ofcom decided that Everything Everywhere (owner of Orange and T-Mobile brands) could reuse their existing 1800 MHz spectrum to launch a 4G service in the UK in October 2012. This decision allowed a 4G service to be launched in the UK in 2012. Everything Everywhere has bought additional spectrum to give themselves additional capacity and coverage with the 800 MHz spectrum.

The 800 MHz spectrum that has been auctioned was used by analogue TV and now that the migration to digital TV is complete can be reused. The characteristics of the 800 MHz frequency means that it is ideally suited to providing widespread 4G coverage. Ofcom therefore auctioned some of the 800 MHz spectrum with an obligation to provide indoor 4G coverage to at least 98% of the UK population by the end of 2017. With a further obligation to provide coverage for at least 95% of the population of England, Northern Ireland, Scotland and Wales. Telefonica (O2) has acquired this spectrum so, I suspect, that it is likely to market its 4G service as having the best coverage.

The 2.6 GHZ spectrum is more suited to high speed localised services in an urban environment. BT has acquired some of this spectrum through its subsidiary Niche Spectrum Ventures. I have seen reports that believe that BT may extend its WiFI services using this spectrum and also use it for wholesale services.

Vodafone has spent the most money on 4G spectrum and has bought the most spectrum. In early February Vodafone announced a 5.2% fall in revenue at its British business during the Christmas quarter. Vodafone claimed that the drop was due to customers chasing bargains elsewhere and not due to EE’s 4G network available for both the Orange and T-Mobile brands. However, this investment by Vodafone clearly indicates that their long term strategy is on high speed data services with 4G.

Hutchison 3G UK was effectively given spectrum at the reserve price because Ofcom wanted to ensure that there are 4 competitive 4G operators in the UK.

The race is now on for all the operators to launch their 4G services by mid-2013. The second half of 2013 is going to see a much more competitive market for 4G services. I suspect that initially operators will compete on speed and coverage but not very aggressively on price. As 4G services mature competition will be more aggressive on price.

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Author: Chris Atkin

Chris Atkin is a videographer specialising in equine videos and an ibd Group accredited Business Adviser for small & medium sized business. YouTube is the second biggest search engine. Talk to Chris to ensure your presence is optimised so that your potential customers can find you on YouTube. Business owners contact Chris for advice on subjects including video marketing, telecomms, funding for growth

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