The Austrian telecoms regulator has concluded the auction of the country’s 2.6GHz spectrum, to be used for LTE deployments, raising €39.5m from the four incumbent operators Telekom Austria, Hutchison, T-Mobile and Orange.

James Middleton

September 21, 2010

2 Min Read
Austrian incumbents win LTE spectrum

The Austrian telecoms regulator has concluded the auction of the country’s 2.6GHz spectrum, to be used for LTE deployments, raising €39.5m from the four incumbent operators Telekom Austria, Hutchison, T-Mobile and Orange.

Graham Friend, of spectrum experts Coleago Consulting, said the prices paid for the paired spectrum is at a similar level to the results from the German auction which also saw the four incumbents secure spectrum but four times lower than the Danish auction, another market with four existing operators. Whilst levels of spectrum supply relative to operator demand is often a significant determinant of spectrum prices, Friend does not believe it is the full story.

“Austria has one of the most competitive and developed mobile broadband markets in Europe and the need for capacity should have pushed prices higher,” he said. However, Friend notes that unusually, the regulator attached rollout requirements to the 2.6GHz band, requiring 25 per cent of the population to be provided with coverage with a downlink of 1 Mbps and 256Kbps on the uplink by no later than December 2013.

“This represents an onerous requirement for operators as it will require them to deploy LTE sooner than perhaps they might have preferred. The coverage requirements will have depressed auction prices,” he said.

Attaching coverage requirements to the 2.6GHz spectrum is unusual as coverage is typically addressed through lower frequency spectrum bands such as 900MHz and 800MHz as the propagation characteristics of the lower bands are more suited to providing coverage.

Coleago found that the relative prices for paired and unpaired spectrum also remains confusing as Hutchison paid less in total for its paired and unpaired spectrum (a total of 65MHz) compared to T-Mobile which only acquired 40MHz of paired spectrum. This outcome is however more likely to be due to the algorithm (a second price rule) used by the regulator to determine the final prices.

The use of second price rules, where the highest bidder wins but only has to pay the amount of the second highest bidder, tends to result in more economically efficient allocations of spectrum but it can lead to interesting variations in price for similar lots. For example Telekom Austria paid 20 per cent more for the same amount of spectrum as Hutchison and T-Mobile paid 40 per cent more on a €/MHz/Pop for its 40MHz of paired spectrum than Orange paid for its 20MHz.

As countries such as Switzerland, Spain and the UK prepare to auction spectrum in the 2.6GHz band the Austrian auction provide some insight into the potential value of the spectrum but considerable uncertainty remains, according to Friend.

About the Author(s)

James Middleton

James Middleton is managing editor of telecoms.com | Follow him @telecomsjames

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