UK's 5G spectrum auction raises £1.4bn
05 April 2018 | James Pearce
UK mobile operators have splashed out more than £1.4 billion on 5G spectrum as regulator Ofcom unveiled the results of its latest spectrum auction.
All four of the UK’s major mobile operators successfully bid for new spectrum that will be able to support 5G services as the auction surpassed expected revenue.
Philip Marnick, Spectrum Group Director at Ofcom: “This is good news for everyone who uses their mobile phone to access the internet. As a nation we’re using ever more mobile data on smartphones and mobile devices.
“Releasing these airwaves will make it quicker and easier to get online on the move. It will also allow companies to prepare for 5G mobile, paving the way for a range of smart, connected devices.”
Telefonica subsidiary O2 was the biggest spender overall, splashing out £317.7 million for 40MHz of 3.4GHz spectrum – which is seen as a key band for 5G deployments – and £205 million to scoop up all 40MHz of available 2.3GHz spectrum, taking its total spend to £523.6 million.
It follows a report from the mobile operator that claimed 5G infrastructure can generate as much as £6 billion in productivity savings for the UK economy.
Telefónica UK CEO, Mark Evans said: “We have been setting the standard for loyalty and customer service in our sector. With this spectrum investment we can build on our publicly recognised Best Network Coverage, to lead the way on network reliability and service as well. The real winners in this auction are customers as O2 invests to further strengthen its award winning network. The airwaves we've secured allow us to further enhance our network, both now and in the future.
“We've thrown down a major marker for our future commitment to the UK. Our investment in 3.4GHz enables us to move forward to further improve connectivity whilst boosting the economy and laying the foundations for 5G in Britain"
Vodafone UK was the biggest single spender on 5G spectrum, bagging 50MHz of 3.4GHz spectrum at a cost of £378 million, while BT-owned EE spent £302 million on 40MHz of 3.4GHz of spectrum.
CK Hutchison’s Three UK bid £151 million for 20MHz 3.4GHz spectrum although it already has some 3.4GHz spectrum following its acquisition of UK broadband provider Relish last year.
Five companies took part but Airspan Spectrum Holdings – a small cell LTE and backhaul vendor backed by technology giant SoftBank – failed to win any spectrum.
Marc Allera (pictured), CEO of BT’s Consumer Division, said: "The acquisition of 40MHz of 3.4GHz spectrum positions us well for our launch of future 5G services and consolidates our position as one of the world’s leading providers of communications services.
“With this outcome, we’ll continue to roll out the fastest 4G service to consumers and businesses across the UK, and now look ahead to the potential new services that 5G will offer, keeping our nation at the forefront of digital communications.”
The auction followed a long-running dispute across the industry over spectrum holdings which saw Three launch a media campaign in an attempt to curb the amount of spectrum that can be held by any one company. According to the Hutchison opco, BT and EE combined owned 45% of available UK spectrum prior to the auction.
The auction began on 20 March after legal action from Three and BT over Ofcom’s rules. Ofcom had originally said the auction would take place in April after the Court of Appeal in London rejected a bid by Three to force a 30% spectrum cap to be imposed on any bidder.
Ofcom has imposed a total cap of 37% on how much any one operator may hold at the end of the auction, a move opposed by BT, which owns EE, today the largest spectrum holder with 45%. BT last year went to court to try to block any move for a cap, but lost its attempt in December.
At the same time the High Court told Three it was wrong to ask for a 30% cap – and that decision was held up by the February Court of Appeal decision.
The 3.4GHz band in particular is seen as a key spectrum band for 5G rollouts as it allows operators to add extra capacity to existing sites without the need to roll out a high number of new sites.
According to Bengt Nordstrom, the CEO of telecoms consultancy Northstream, the fact that operators paid “higher than expected” amounts for the spectrum could have a negative impact on consumer experience as it may impact further investments in 5G infrastructure.
He said: “The results of the auction confirm our view that the mobile industry has passed the stage where we should expect new entrants in national markets to build and launch new mobile networks that compete with the incumbents. This in turn makes the idea of a competitive spectrum auction even more strange. It was a given that the UK’s four incumbent operators would win the 5G licences - therefore why would Ofcom drive up the prices?”
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