Study: UK LTE auction could trigger change to operator landscape

A potential lack of revenue opportunities from LTE deployments could force UK operators to question their involvement in the much-delayed spectrum auction, according to a new study.

The study, conducted by the giant law firm Freshfields Bruckhaus Deringer, claims that service providers are increasingly worried by the costs associated with LTE licence fees and deployment capital expenditures when set against potential revenues streams.

Operators are said to be cautious of LTE given the poor track record seen with 3G auctions and deployments. Mobile providers around the world have paid in the order of $150 billion for 3G licences over the past 10 years, and yet almost a third of these failed to deliver 3G services, and over 50 per cent missed deadlines for the rollout of 3G services.

Natasha Good, partner in Freshfields' telecoms, media and technology sector, said in a statement that operators have already proven reluctant to pay more than the underlying value of the spectrum designated for LTE. "The exorbitant fees paid during the heady days of 3G led to a reduction in their share prices and debt ratings and they now have a better feel for what consumers will pay for data services," she said

"The UK's draft auction rules explicitly aim to preserve competition but as we've seen with 3G and Germany's auction of LTE, it's debatable whether the UK mobile market will realistically continue long term in its current form post-LTE," Good. said "Mobile termination rates are being squeezed, voice is declining and there's a huge amount of data coming across the networks. Where will the revenue come from?"

The Freshfields study highlights the German LTE auction where the rules were designed to encourage competition and create a level playing field by limiting the number of bids for 900MHz spectrum, with newcomers being allowed to bid for more.

Despite this, Good says that this approach fuelled rumours of consolidation in the German operator market after the three dominant players emerged as the key winners in the LTE spectrum race, while E-Plus had to pull out of bidding for spectrum in the 800MHz band.

For more:
- see this Freshfields release

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