UK LTE spectrum auction draws £2.34B, below government expectations

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UK mobile operators are the winners in the LTE spectrum auction, paying a total of £2.34 billion (€2.68 billion), significantly below the government's expectation of £3.5 billion.

Telecoms regulator Ofcom said that after more than 50 rounds of bidding, EE, 3 UK, BT, Telefónica's O2 UK and Vodafone had all won a share of the LTE spectrum.

Of note, the UK's fixed line operator, BT, is paying £186 million for three blocks of 2.6 GHz spectrum, which it will use to provide its customers with better mobile broadband. However, as a new entrant to mobile, the company does not plan on building a national mobile network, according to Reuters, meaning it will likely become an MVNO of another operator, perhaps EE or Vodafone.

Vodafone bid nearly £800 million to acquire two blocks at 800 MHz and three blocks at 2.6 GHz. Vodafone UK CEO Guy Laurence said it had secured the 800 MHz band to support the launch of its LTE service later this year. "It will enable us to deliver services where people really want it, especially indoors," he told Reuters.

Telefónica's O2 UK was successful in paying £550 million to obtain one of the 800 MHz blocks of spectrum. However, the operator is obliged by a licence condition to provide an indoor mobile broadband service to high percentages of the UK population.

EE, the largest UK operator and already offering LTE on refarmed 1800 MHz airwaves, paid £588.8 million to buy spectrum at 800 MHz and 2.6 GHz to extend coverage countrywide, Ofcom said.

Here is a breakdown of the winning bids, provided by Ofcom:

Winning bidder

Spectrum won

Base price

Everything Everywhere Ltd

2 x 5 MHz of 800 MHz and
2 x 35 MHz of 2.6 GHz

£588,876,000

Hutchison 3G UK Ltd

2 x 5 MHz of 800 MHz

£225,000,000

Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc)

2 x 15 MHz of 2.6 GHz and
1 x 20 MHz of 2.6 GHz (unpaired)

£186,476,000

Telefónica UK Ltd

2 x 10 MHz of 800 MHz
(coverage obligation lot)

£550,000,000

Vodafone Ltd

2 x 10 MHz of 800 MHz,
2 x 20 MHz of 2.6 GHz and
1 x 25 MHz of 2.6 GHz (unpaired)

£790,761,000

Total

 

£2,341,113,000

Two bidders, MLL Telecom and Hong Kong-based HKT, were unsuccessful.

3 UK was able to win a slice of the valuable 800 MHz band, and coupled with the spectrum at 1800 MHz it acquired from EE prior to the auction puts it in a strong position to roll out its LTE network, according to Ovum analyst Matthew Howett.

"Other key results include the commitment BT has made to rolling out its own LTE services, and Telefónica UK's lack of higher value spectrum which is needed to meet growing data demands," he wrote

However, Howett warned operators that the difficult part now will be convincing consumers to upgrade and subscribe to LTE once services are launched by EE's rivals in a few months' time.

For more:
- see this Ofcom release
- see this Daily Telegraph article
- see this Reuters article
- see this Ovum release
- see this Bloomberg article

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