Ofcom delays spectrum auction following O2/Three legal threat

UK telecoms regulator Ofcom postponed a planned auction of frequencies in the 2.3 GHz and 3.4 GHz bands until after the European Commission (EC) decides whether or not to allow the proposed acquisition of O2 UK by CK Hutchison.

The regulator said it had received letters from both Telefónica UK (O2 UK) and Hutchison 3G UK (Three UK) stating the intention of both operators to bring judicial review proceedings against Ofcom's decision to commence the auction process before the Commission made its decision on the proposed merger.

The EC opened an in-depth investigation in late October to assess whether the proposed acquisition of Telefónica UK by Hutchison would harm competition. It is expected to reach its decision on Apr. 18, 2016 after the previous deadline was extended by a further 20 days. According to Reuters, the Commission on Friday also rejected a request by the UK Competition and Markets Authority (CMA) to examine the merger.

As a result of these developments, Ofcom said it has decided "for reasons of good public administration" to delay the start of the auction process until after the EC has come to a decision.

Ofcom had originally planned to invite applications for the auction of newly available spectrum in the 2.3 GHz and 3.4 GHz bands this month and has already set a total reserve price of £70 million (€97 million/$106 million). The UK Ministry of Defence (MOD) is releasing the spectrum as part of government plans to make 500 MHz of spectrum available for civil use by 2020.

Overall, a total of 190 MHz of new spectrum is to be auctioned once the process does get underway -- 40 MHz of spectrum within the 2.3 GHz band (2350-2390 MHz) and 150 MHz of spectrum within the 3.4 GHz band (at 3410-3480 MHz and 3500-3580 MHz).

Ofcom has already decided to auction the spectrum without imposing spectrum caps or withholding spectrum for auction at a later date. It noted that the spectrum could be used to meet the growing demand for mobile broadband services in the UK.

Meanwhile CK Hutchison said in November that it remained confident of gaining clearance for its proposed acquisition of O2 UK from Telefónica. The Hong Kong-based group said it continued to believe that combining its Three UK business with O2 UK would be a good move for consumers in the market.

For more:
- see this Reuters article
- see the EC case file
- see the Ofcom statement

Related articles:
Ofcom sets £70M reserve price for 2.3 and 3.4 GHz spectrum
Ofcom considers 2-pronged approach to 2.3 and 3.4 GHz award
CK Hutchison bullish on O2 UK merger clearance, as EC's Vestager investigates
Mallinson: O2 UK/Three UK, BT/EE mergers show devil is in the details on consolidation benefits
EC's Ansip sides with Vestager on telecoms M&A

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