UK LTE spectrum auction attracts 7 bidders, but no windfall expected

Telecoms regulator Ofcom named seven companies that have been named as bidders for the UK's LTE spectrum auction. BT, Hong Kong's PCCW and managed networks firm MLL Telecom joined in the country's four mobile operators in lining up for the bidding, which will start in January.

However, any hope of repeat of the bonanza surrounding the 3G auction, which attracted bids totalling £22.5 billion (€27.6 billion), was quashed by Ofcom CEO Ed Richards.

"The backdrop to this is utterly different," Richards told Reuters. "When the 3G auction was done you were still at the height of the dotcom boom. We are in the so-called age of austerity now."

While the UK government has publicly budgeted for the auction to produce £3.5 billion, analysts have estimated that the amounts raised could be between £2 billion and £4 billion, according to the Financial Times.

However, calling this could be difficult given that the Irish LTE auction generated only £855 million last month, while the Dutch auction this week raised €3.8 billion (£3 billion).

Complicating the issue is the head start Ofcom has provided EE by allowing it to use refarmed 1800 MHz spectrum to launch LTE this fall. The regulator told Reuters that this had been a calculated move to put an end to the desire of Telefónica's O2 UK, Vodafone and 3 UK to delay the auction further with legal arguments over how the spectrum should be packaged.

Analysts at Espirito Santo said they were not surprised by the bidders, and they didn't expect the UK to mimic the bidding seen in the Netherlands. "We remain comfortable with the £1 billion... we have pencilled in for each licence into our Vodafone, EE, Telefónica models," they wrote, according to Reuters.

"The way the auction is designed... ought to allow the incumbent mobile network operators and niche players to pick up what they need without going head to head," the analysts wrote.

They noted that BT had previously indicated it was only interested in acquiring niche amounts of spectrum to support its existing strategy, while PCCW and MLL were also likely to bid on a speculative or opportunistic basis.

While the main interest will centre on the 800 MHz band, Ofcom told Bloomberg that it will impose maximum and minimum amounts of spectrum that Vodafone, Telefónica and other operators can bid for and also reserve spectrum exclusively for a fourth operator--widely seen as protecting the interest of 3 UK, the country's fourth largest operator. The companies will also bid for spectrum in the 2.6 GHz band.

For more:
- see this Ofcom statement
- see this Reuters article
- see this FT article (sub. req.)
- see this Bloomberg article

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