BT joins UK LTE spectrum auction as doubts surface over £3.5B target

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The UK's four largest operators will now have BT as potential rival bidder in the upcoming UK LTE auction. All five companies submitted their applications and £100,000 deposits with the telecoms regulator Ofcom, although a full list of those participating will not be published for a few weeks.

However, while the application deadline has passed, private equity firms, non-UK telecoms operators and players from outside of the industry could also have registered their interest prior to the cut-off, unnamed sources told the Daily Telegraph. Bidding is expected to begin in January and last for several weeks, and operators are expected to launch LTE service in May or June.

What does seem clear is that BT is only interested in bidding for spectrum at 2.6 GHz, and not the 800 MHz band which will be fought over by the four mobile operators, according to the Financial Times.

"We have fired the starting gun on the 4G auction process," Ofcom chief Ed Richards said in a statement. "In the past year alone, mobile internet usage has doubled. The 4G auction will release crucial capacity to support future growth, helping to boost UK productivity, innovation and drive significant improvements to mobile broadband availability across the UK."

Of keen interest to all will be the bids made for either band, after the UK government recently said it expected the auction to raise a total of £3.5 billion (€4.3 billion). However, this figure is now being questioned by analysts, with James Barford at Enders Analysis telling BBC News that the auction could struggle to reach this number.

"Auctions are always very difficult to predict," he said. "What I would say is that if you look at the European auctions of LTE and expect the same prices in the UK, ours should raise about £2.5 billion.

"I wouldn't say £3.5 billion is beyond the realms of possibility, but it is a little hard to see," he said. "It was the same mobile phone companies, or least their parent firms, who participated in the European auctions as will do so in the UK."

Brian Potterill, a director of telecoms strategy at accountancy firm PWC, told the Daily Telegraph that the spectrum auction could fetch anything from £2 billion to £4 billion. "There is a lot of uncertainty around it," he said. "The other auctions in Europe suggest a £3 billion."

Of note, Potterill suggested that private equity firms could create a secondary market for LTE spectrum after the auction is finished. "They could be trying to get a squeeze on spectrum and trade it like a commodity," he said.

However, Shaun Collins, the CEO of industry research firm CCS Insight, said that the auction could exceed its £3.5 billion target. "At the end of the day, it is an auction, it has been structured to maximise the return to the government," he told BBC News. "So £3.5 billion may be a little modest."

For more:
- see this Ofcom page
- see this Daily Telegraph article
- see this FT article (sub. req.)
- see this BBC News article

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