Bloomberg News

U.K. Spectrum Sale Should Not Dictate Market Size, Vodafone Says

June 03, 2011

June 4 (Bloomberg) -- U.K. regulators must avoid determining the number of mobile-phone operators in the country before a frequency auction that may raise as much as 2.6 billion pounds ($4.3 billion), said Vodafone Group Plc’s public policy director.

Ofcom wants to maintain at least four national carriers and would impose limits on the minimum and maximum amounts of frequencies set to go on sale in the first quarter of 2012 to ensure competition. The industry should decide the size of the market in the long run, Richard Feasey said.

“I’m not sure it’s always wise for regulators to always prescribe what the market structure will be,” Feasey said in an interview yesterday in Athens. “It’s important to get it done right, more than getting it done fast.”

The auction has been delayed for more than two years amid legal challenges. Vodafone, the world’s largest wireless carrier, and Telefonica SA’s O2 previously opposed restrictions on the amount of low-frequency spectrum they could bid for. Market leader Everything Everywhere, a venture of France Telecom SA and Deutsche Telekom AG, said Ofcom’s proposals haven’t gone far enough and are “undermining the long-term prospects” of operators who don’t hold low frequency airwaves.

The venture is asking Ofcom to increase the minimum amount of 800 megahertz spectrum that operators can acquire.

Data Boom

The auction will sell frequencies equivalent to three- quarters of the spectrum now used by operators. Carriers need the bandwidth to cope with surging data demand as users watch films and surf the Web on smartphones such as Apple Inc.’s iPhone and handsets using Google Inc.’s Android system.

Newbury, England-based Vodafone and Madrid-based Telefonica are the only operators in the U.K. to hold low-frequency 900 megahertz airwaves. France Telecom’s Orange and Deutsche Telekom’s T-Mobile together own five times as much of the 1.8 gigahertz band than the other two operators combined.

“The current proposals for the sub-1GHz spectrum do not significantly reduce O2 and Vodafone’s dominance in the market,” Everything Everywhere said.

Everything Everywhere had 27.7 million customers at the end of March, after losing 155,000 users it shifted to longer contracts. Telefonica’s client base climbed 4 percent to 22.3 million customers. Vodafone, the third-largest operator in the U.K., had 19.1 million subscribers.

Certainty Needed

“The UK has suffered particularly acutely from a very extended period of uncertainty on this issue,” Feasey said. “It’s very desirable that there is more certainty about what the long-term position of spectrum will be, and that will only arise after the auction is completed because then the industry in the U.K. can get on with investing and building the next infrastructure.”

Hutchison Whampoa Ltd., the smallest of the four operators, said this week that it would pay a fair price at the auction if the proposals continue to ensure at least four national operators can remain in the market.

“In essence our view is that they haven’t gone far enough,” Kip Meek, who advises Everything Everywhere and formerly worked for Ofcom, said in an interview. The company is still “very supportive of a quick solution.”

Ofcom sought submissions by May 31, although some operators, including Vodafone, haven’t put in responses. The regulator plans to publish their comments when they become available.

Spectrum sales will also take place in France, Spain, Switzerland and Italy this year as frequencies from television signals become available. Regulators are also planning an auction in the Netherlands in 2012.

In Italy, the sale will start as early as September and be completed by the end of the year, Enzo Savarese, commissioner of the Agcom regulator, said in an interview in Athens. Italy plans to publish technical rules next week, he said.

The Italian government and local broadcasters will take between six to 12 months to agree on freeing up frequencies by combining their programs, Savarese said. The airwaves will be available by the end of 2012, one year after the operators pay for them.

--Editors: Kenneth Wong, Simon Thiel

To contact the reporters on this story: Cornelius Rahn in Athens via crahn2@bloomberg.net Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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