German spectrum auction could have been €3B cheaper, say analysts

Analysts said Germany's three mobile operators could have spent around €3 billion ($3.4 billion) less but secured the same or a similar outcome in the country's recent spectrum auction, which ended last week after raising €5.081 billion from the sale of blocks in the 700, 900, 1800, and 1500 MHz bands.

In comments emailed to FierceWireless:Europe, Stefan Zehle, CEO of Coleago Consulting, noted that the auction could have ended after round 34 but with the same result in terms of the blocks acquired by the operators. The total price would then have been only €1.993 billion. Instead, the auction process lasted for 181 rounds.

The consultancy firm appeared to attribute some of the blame for the elevated prices to Vodafone Germany, which "amazingly, in round 31" stepped up its bidding for spectrum in the 1800 MHz band and submitted the highest bids for five of the 10 blocks on offer.

"At this point the 'negotiation' between bidders seemed to fail and it set the scene for the 1800 MHz block to become the focus of a bidding war," Zehle noted.

Analysts from Jefferies International, which had predicted total proceeds would amount to around €4.5 billion, also said the German auction could have been cheaper.

"The high spending on such a relatively logical outcome begs the question why the three bidders, having recently consolidated from four to three, were not able to settle at a lower price. We note that the auction price shot up by €1 billion since close of 16 June (Round 154), without changing the results materially," Jefferies said.

Vodafone Germany spent the most at €2.1 billion, and Jefferies said the company managed to establish a more credible position at 1800 MHz, "which addresses a key issue in its 4G rollout" and enabled the operator to repair a "sub-par position" in this frequency band.

Jefferies noted that Vodafone had previously relied mainly on 800 MHz spectrum for LTE in urban as well as rural areas. Deutsche Telekom, on the other hand, used 800 MHz mainly for rural areas but was able to utilise its strong position at 1800 MHz for urban areas, which are more suited to the higher frequency bands.

Meanwhile Telefonica's "overall relatively restrained bidding reflects the company's rather comfortable position at 2 GHz," Jefferies added.

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