Tuesday marks the next important milestone in the UK’s telecoms market as prospective bidders submit applications for 4G spectrum.
Between 10:00 and 16:00 on December 11, 2012, interested parties are able to submit applications, accompanied by an initial deposit of £100,000 into Ofcom’s bank account. The passing of the deadline takes the UK one step closer to the completion of a highly controversial and long-awaited spectrum action, which is expected to be finalised by February or March next year.
UK regulator Ofcom has set a reserve price of £1.3bn for all available spectrum, including 2x15MHz of 1800Mz spectrum that Everything Everywhere is required to divest as part of the deal that saw it cleared to launch LTE at 1800MHz in October.
As far as the UK’s mobile operators are concerned, the auction can’t happen soon enough. Despite the encouraging signs seen since EE went live, the UK is still lagging far and away behind the world’s most advanced 4G markets.
To put this in context, according to Thomas Wehmeier, Principal Analyst at Informa Telecoms & Media, by the time the remaining 4G networks are switched on at some point in the middle of next year, more than one-third of Korean and about 20 per cent of Japanese consumers will already be actively using 4G services in their respective countries.
“But that’s not to say that we don’t expect to see a marked acceleration in the pace of 4G adoption in the UK next year. By that point, most of the high-end flagship phones on sale in the UK will support 4G technology, we can expect to see some pretty competitive pricing as the markets kicks into life and the inevitable blanket market campaigns are sure to lift interest in and adoption of 4G amongst UK consumers,” he said.
Analysts are expecting the amount raised to represent just a fraction of the record £22.5bn spent during the 3G licensing round in April 2000, during exceptional times, before the dotcom bubble burst. The industry will be much more cautious this time around, not least because of the weak economy and the declining revenues that many operators are suffering in the UK and across Europe.
In his recent Autumn Statement, the UK Chancellor George Osborne pegged the amount the UK Treasury is hoping to raise at £3.5bn, which puts the official view slightly above industry expectations, but broadly on par with the amounts raised in similar auctions in other European markets such as Germany.
Informa is expecting the auction to attract all the usual suspects , meaning the UK’s existing mobile operators Vodafone, Telefonica O2, 3 UK and, of course, EE, which will be looking to bolster its existing 4G spectrum position.
“What we don’t know and can’t predict is whether we’ll see any wildcard bids. There’s been plenty of industry speculation about the possibility of some of the UK’s other telecoms and media powerhouses, the likes of Virgin Media, Sky or BT, entering the fray, but the experience of looking to other markets that have held similar auctions means we should be surprised if there is a genuinely disruptive and large-scale bid from one of the players. It can’t be ruled out, but it would certainly be unexpected,” Wehmeier said.