Report: Early spectrum auction a 'nightmare scenario' for German operators

Germany's four mobile operators could face further massive bills for new spectrum licences as early as next year under plans of the German telecoms regulator to bring forward auctions, according to reports.

Citing documents prepared by Germany's Federal Network Agency (Bundesnetzagentur), German daily Frankfurter Allgemeine Zeitung said the regulator intends to auction off spectrum in the 700 MHz band in 2014 or 2015. Also under discussion are the 900 MHz and 1800 MHz bands the operators currently use for 2G services. Existing licences for the GSM spectrum expire in 2016, and operators have called for these licences to be extended on a technology neutral basis rather than redistributed; previous reports had also suggested the telecoms agency supports 2G refarming.

For the already-struggling operators, an early spectrum auction would represent a "nightmare scenario," FAZ noted. In today's competitive and economic environment they can ill afford the billions of euros that would be required to secure the spectrum after already having spent almost €4.44 billion on spectrum--including digital dividend frequencies in the 800 MHz band--in 2010.

Bloomberg said the reported timing is earlier than expected and would be a particular strain on the finances of smaller operators O2 Germany, owned by Telefónica Germany, and E-Plus, owned by KPN. They compete with larger operators Deutsche Telekom and Vodafone Germany.

"A 2014 date would increase the pressure on operators," JPMorgan Chase & Co. analyst Hannes Wittig told Bloomberg. "Investors would probably worry most about the financial impact on Telefónica Deutschland and KPN; however, an earlier date could also be seen as a reason to accelerate discussions regarding a potential merger of the two smaller carriers."

An E-plus spokesperson told FAZ that the company would rather invest in an accelerated expansion of broadband networks "instead of an unnecessary and premature frequency auction".

The allocation of frequencies in the 700 MHz band, dubbed "digital dividend II," is viewed as necessary for the further advancement of LTE networks in Germany to achieve the goal of providing "at least" 50 Mbps services to every consumer in Germany by 2018, "even in thinly populated regions," FAZ said.

However, the move to allocate frequencies for telecoms services will also cause anger among the broadcasters that currently use these airwaves for TV and radio services and believe they are essential for DVB-T services at least for now. FAZ said broadcasters ARD and ZDF have called for the transfer period to be extended to 2020.

In response to requests for comments, the Federal Network Agency did not directly comment on the FAZ report, but said: "The Bundesnetzagentur plans to launch an open and transparent discussion on frequency spectrum for mobile broadband. The next step is the consultation with the Advisory Council of the Bundesnetzagentur on Monday, June 24."

For more:
- see this Frankfurter Allgemeine Zeitung article (translated via Google Translate)
- see this Bloomberg article

Related Articles:
Rising German mobile data usage triggers call for 2G refarming
Mallinson: Spectrum auctions need to generate investment, not just government revenue
Year in review 2012: European LTE gains traction, at last
Deutsche Telekom slashes dividend, puts focus on German LTE deployment
O2 Germany, E-Plus may move toward network sharing deal

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