4G mobile spectrum auction disappoints raising ‘just’ £2.34bn

Ofcom, the telecoms regulator, has announced that the auction of 4G mobile spectrum has raised £2.34bn, well below the £3.5bn pencilled in by the Treasury and the Office of Budget Responsibility who had expected it to raise upwards of £3.5bn. The auction netted far less than the £22bn that was raised thirteen years ago when 3G licenses were auctioned.

While the government may be disappointed smartphone and tablet computer users can expect to see the roll out of super fast download speeds.

The winning bidders are: Everything Everywhere; Hutchison 3G UK; Niche Spectrum Ventures, a BT subsidiary; Telefonica (O2); and Vodafone. Vodafone bid £791m, the most of all the bidders, for fives chunks of spectrum.

Speaking to the BBC Ed Richards, Ofcom’s chief executive, said that the figure was lower because “we are in very, very different times”.

A Treasury spokesperson said that the £3.5bn number, which had been announced by the Chancellor in his Autumn Statement last year, had been certified by the independent OBR and based on external expert independent analysis based on similar auctions.

Both the Chancellor and the OBR have come in for criticism as a result with critics, both inside and outside the government, suggesting they had been overly optimistic in terms of the revenues they thought the auction would bring. It would appear that bidders held off making much higher bids for spectrum because of the experience of EE which launched its 4G service last year. EE, the T-Mobile and Orange joint venture, was the first to launch a 4G service in late 2012, but has struggled to attract users, leading it to cut its prices in January.

Commenting on the auction Victor Basta, managing director of Magister Advisors an M&A advisory firm to the technology industry said, “The disappointing revenues from the 4G auction, well below Government forecasts, are a reflection of the challenges that mobile operators face in growing revenues from their users in the social media age. Data-heavy social media services are causing huge growth in data traffic across mobile networks. Mobile operators increasingly find themselves in a role that is about supporting end users’ social networking habits, with little, if any, commercial benefit.”

Ofcom auctioned the spectrum in two bands, 800MHz and 2.6GHz, equivalent to two-thirds of the radio frequencies currently used by tablet computers, smartphones and laptops and believes that 4G will provide £20bn of benefits for UK consumers over the next 10 years.

The impact on the wireless services market will be considerable, according to Andrew Green, VP of Marketing for Mobile Computing at Sierra Wireless. He said that, “The widespread adoption of 4G in the UK will inevitably change the wireless services market. 4G is a game changer, particularly for operators, who will be able to provide much better service consistently across their networks at a lower cost. For the average user, it means being truly mobile, able to do the same things online on-the-go that you can do at home on your wired connection.

“In addition to improved broadband performance across the network, it opens up all kinds of applications that were previously not practical with earlier generations of wireless technology, and expands on those that were available. For example, connected cars will be able to provide richer information and entertainment applications in real time. Moreover, there are many devices and applications being rolled out around the world that really do benefit from 4G performance. In markets where we have launched 4G devices, end users have been prompted to drop their wired connection in favour of a better (and portable) 4G connection.”

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