UK 4G Auctions becoming a reality

The UK’s much-delayed LTE spectrum auction process has kicked off, with regulator Ofcom saying it had “fired the starting gun” by collecting deposits for final applications to bid, Cell:cm has learned.

Reports from Rethink Wireless say Ofcom gave participants a six-hour window to submit their applications and produce the £100,000 upfront fee, though the names of the bidders have not been released. The four cellcos, Everything Everywhere, Vodafone, Telefonica O2 and 3UK, are all presumed to be taking part and there could also be one or more new entrants, such as British Telecom, BSkyB or Virgin Media (though the latter has said it will not take part).

Applications will now be reviewed and those cleared to bid will be revealed late this year or early in 2013, ahead of the auction. In November, Ofcom set a reserve price of £1.3bn for the total sale of 2.6GHz and 800MHz spectrum but some analysts think it will not achieve the £3.5bn the government is targeting for the Treasury from the sale. This would be a far cry from the £22.5bn raised in the UK’s 3G auction in 2000.

Milan Sallaba, head of telecoms strategy advisory at KPMG, told TotalTelecom: “Each of the existing UK mobile network operators is under significant pressure to upgrade their networks to 4G, but most of them are having a tougher time making money from mobile data. Unless additional credible contenders emerge and join the bidding, the auction may bring in less than the £3.5 billion expected by the government.” He calculates that the German LTE auction in 2010 raised the equivalent of £50 per capita, which would equate to £3bn in the UK, though the recent Irish sale netted £689m or £146 per head.

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