The Netherlands’ 4G spectrum auction ended on Friday, having generated more money than expected for the government. So should other European countries raise their expectations? Guy Daniels reports.
The Dutch government raised €3.8bn in last week’s 4G spectrum auction, which was considerably higher than expected. It had earlier said it estimated that the auction would raise less than €500m… Like all European governments, the Dutch are struggling to manage huge public debts and are having to impose stringent austerity measures. No doubt the extra €3.3bn will be a most welcomed early Christmas present.
Incumbent mobile operators KPN, Vodafone and Deutsche Telekom all won licences, as did new entrant Tele2 of Sweden (who currently only operates in the Netherlands as an MVNO). A joint bid by cable and broadband companies Ziggo and UPC ended when they withdrew from the auction as the bidding escalated.
As a result, Reuters reports that KPN said it would have to cut its dividends to afford the new 17-year licences. It will no longer pay a final dividend for 2012 and will pay out a paltry €0.03 per share for 2013. The telco says it will commence roll-out of 4G services as early as February 2013.
Of the 41 separate spectrum operating licences on offer, Vodafone paid €1.38bn for 9 licences, KPN paid €1.351bn for 15 licences, T-Mobile paid €911m for 15 licences, and Tele2 paid €161m for 2 licences.
Eyeing the results with keen interest will be the UK’s Chancellor of the Exchequer, George Osborne, who a couple of weeks ago used the forthcoming 4G auction to balance his books. In his Autumn budget statement, he claimed that the UK would raise £3.5bn (€4.3bn) from the auction, which is due to commence next month, despite regulator Ofcom setting a much lower reserve of just £1.3bn.
If the UK auction doesn’t generate £3.5bn or more, he’ll have even more egg on his face than he does at the moment, so he must be breathing a sigh of relief at the Dutch outcome.
It should be noted that the UK is offering less spectrum than the Dutch, although the population and hence target market is considerably higher.
Brian Potterill, director of the telecoms strategy team at consultants PwC, said he expects the UK government to net between £2bn to £4bn from the auction, and that the Dutch result suggests the UK prices will be towards the high end of expectations:
“The high prices in the Netherlands were caused by the government setting aside some of the most valuable 800MHz spectrum for a 4th operator. This created a squeeze, which drove up prices. The UK 4G auction is designed to ensure that a 4th operator can get a credible portfolio of spectrum but doesn’t specifically set aside the valuable 800MHz, so it is unlikely that we will get the same squeezed conditions from the larger operators. However, the Netherlands result adds to the sense that mobile spectrum is increasing in value as demand for Smartphones grows.”
Matthew Howett, telecoms regulation analyst at Ovum, says that unlike the Dutch auction, there is little chance of a new operator emerging, despite rumours that BT has submitted an application to bid:
“They would have to acquire a significant amount of spectrum in the auction to be a credible nationwide operator. There was previously some spectrum reserved in the 2.6GHz band, however Ofcom dropped these proposals. There is nothing stopping a new entrant now chasing the unpaired part of the 2.6GHz band, but on its own it would not be enough spectrum to operate a nationwide network.”
We’ll soon know. Europe’s most competitive mobile market starts its 4G auction in late January, with results expected at the end of February (just in time for Mobile World Congress) or early March at the latest.
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