5G mobile spectrum auction raises £1.3bn

Telecoms regulator Ofcom has announced the conclusion of the first stage of the mobile network spectrum auction, raising £1.37bn for the public purse.

The auction, which began on 20 March, saw 190MHz of spectrum go under the hammer – 40MHz of immediately usable spectrum in the 2.3GHz band to support existing 4G mobile networks, and 150MHz in the 3.4GHz band to form the basis of future 5G mobile networks.

“This is good news for everyone who uses their mobile phone to access the internet,” said Ofcom spectrum group director Phil Marnick. “As a nation, we are 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.”

Five companies, including all four mobile network operators (MNOs), took part in the auction, and Ofcom confirmed that EE, O2, Three and Vodafone will divide up all the available spectrum between them. The fifth bidder, long-term evolution (LTE) backhaul specialist Airspan Spectrum Holdings, failed in its bid.

A sixth bidder, Hull-based wireless service provider Connexin, dropped out before the process formally began.

Out of all four MNOs, Telefónica-backed O2 and Vodafone have emerged as the big winners, with O2 winning all the available 4G spectrum at a cost of £205.9m and 40MHz of 5G spectrum at a cost of £317.7m, and Vodafone winning 50MHz of 5G spectrum at a cost of £378.2m.

EE – which was excluded from the 4G bidding process under new rules capping how much spectrum it may own – won 40MHz of 5G spectrum at a cost of £302.6m, and Hutchison-backed Three won 20MHz of 5G spectrum at a cost of £151.3m.

The total amount of spectrum sold off equates to about three-quarters of the total spectrum sold in the 2013 4G spectrum auction, which raised £2.34bn and was deemed a disappointment given that the previous 3G auction in 2000 netted the government £22.5bn.

However, the vast amounts paid by the operators in the 2000 auction meant they struggled to generate an effective return on investment (ROI), and the UK’s auction has subsequently been implicated as a major cause of the telecoms industry recession in the early 2000s.

After that, the auction process was redesigned to enable operators to achieve ROI, and to let Ofcom meet its remit to manage the use of spectrum efficiently, with consumers’ interests put ahead of the Treasury’s.

Telefónica UK CEO Mark Evans said O2’s success in acquiring all the available 4G spectrum was a major win for its customers, particularly as this meant it had effectively spend the least per MHz of any bidder across the whole process.

“We have been setting the standard for loyalty and customer service in our sector,” said Evans. “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 have secured allow us to further enhance our network, both now and in the future.”

Evans said O2 would move to enable users to access the 4G spectrum within 24 hours of the regulator releasing it for use.

The auction will now move on to the second, assignment stage, which will determine where in the frequency bands the spectrum awards will be located. After that, Ofcom will issue licences to the winning bidders.