UK’s 5G spectrum auction raised only £1.36B, just above the £1.1B reserve price and a fraction of the £22.5B 3G auction in 2000 – The result of the auction, announced by media and telecoms regulator Ofcom on Wednesday, is only slightly higher than the £1.1bn reserve
The result of the auction, announced by media and telecoms regulator Ofcom on Wednesday, is only slightly higher than the £1.1bn reserve price, and is a fraction of the £22.5bn raised in the UK’s 3G auction at the turn of the century when the mobile industry was in its growth phase.
While a previous 5G sale in 2018 raised £1.35bn, some analysts had predicted this auction could raise more than £2.5bn.
Karen Egan, an analyst with Enders Analysis, said: “While the results of this auction is a very positive upside surprise for the operators — almost all of whom have something of a cash crisis going on — the exchequer will be disappointed that the proceeds are around half those that they might
For the UK’s four mobile phone operators, the sale will hand them vital capacity as they look to expand their 5G networks.
Spectrum is a critical resource for the mobile phone industry as it determines the speed and capacity of an operator’s wireless network. Historically lower band frequencies have been more powerful for mobile phone services but higher bands can be used for 5G, meaning networks have had to broaden the spread of their spectrum holdings.
The latest auction was originally due to take place last year but was delayed by the pandemic. The government’s move to eradicate mobile “not spots” in rural areas also required an alteration to the auction process.
The auction went smoothly in the end due to what one company representative called “a sweet alignment” between what each network needed to fill out their spectrum position and what was on offer.
The need to show financial discipline due to strained balance sheets also reduced the temptation for stronger networks to try to game the auction by bidding up prices to hurt competitors or to buy spectrum to hoard as has been the case in the past.
BT, which owns EE, and Telefónica’s O2 were the biggest spenders in the latest 5G sale as both companies spent about £450m to boost their spectrum positions. The groups acquired spectrum in the lower 700MHz band that was previously used to broadcast television signals and the higher 3.6-3.8 GHz frequencies.
The two companies, the largest mobile networks in the UK, had the most to lose during the auction. The 5G sale is the first in a series of hurdles for BT’s management in the coming months. Its shares rose 4 per cent to 149p as the investment in new spectrum proved to be less expensive than some analysts had feared.
O2 meanwhile is in the last stages of merging with Virgin Media to create a stronger competitor to BT in the 5G and fibre broadband era meaning that it could ill-afford to miss out on potentially vital spectrum.
Three, owned by CK Hutchison, already has the largest spectrum holding for 5G services after it acquired assets owned by a sister company in 2017. The company, which hopes to broaden its appeal in the mass market in the 5G era, spent £280m to shore up its low-band position that should boost the strength of its network.
Conversely, Vodafone only bought in the higher frequencies and spent a modest £176m. Its shares gained 1 per cent to 136.25p.
Ofcom said that the auction would help strengthen Britain’s coverage. “This is an important step forward in bringing better mobile services to people — wherever they live, work and travel,” said Philip Marnick, head of spectrum at Ofcom.