Bloomberg News

Everything Everywhere May Get Head Start in New Web Services

January 16, 2012

(Updates with shares prices in fifth paragraph.)

Jan. 13 (Bloomberg) -- Deutsche Telekom AG and France Telecom SA’s U.K. mobile-phone venture may get a head start in high-speed mobile-phone services as the watchdog revised its design of a 2.6 billion-pound ($4 billion) frequency auction.

Everything Everywhere, which has applied to regulators to run faster services on its existing airwaves, has “an early route” to high-speed mobile Internet with its current holding, regulator Ofcom said yesterday as it announced proposals for an upcoming spectrum auction.

British carriers are seeking access to more frequencies to offer faster services and cope with surging data demand as users watch films and surf the Web on smartphones including Apple Inc.’s iPhone and handsets using Google Inc.’s Android system. Rolling out faster services early may help Everything Everywhere to stem a decline in customers and steal a march on rivals Vodafone Group Plc and Telefonica SA.

“This is the most significant spectrum release in the U.K. for many years,” Ofcom Chief Executive Ed Richards said. “The U.K. benefits from being one of the most competitive mobile phone markets in Europe.”

Deutsche Telekom and France Telecom both rose as much as 1 percent in Frankfurt and Paris trading respectively. Vodafone gained as much as 1.1 percent in London and Telefonica climbed as much as 1.3 percent in Madrid.

All the companies have been seeking access to the valuable 800 megahertz band of low-frequency spectrum that can travel long distances with fewer expensive base stations. Vodafone, based in Newbury, England, and Spain’s Telefonica are the only operators in the U.K. to hold low-frequency airwaves.

In its revised proposals Ofcom said it won’t reserve spectrum for Everything Everywhere, though it will probably guarantee frequencies for Hutchison Whampoa Ltd.’s Three or a new company to keep four operators in the U.K.

‘Be Happy’

Ofcom emphasized that Everything Everywhere could roll out the faster services, known as LTE, early, to compensate for the loss of that guarantee, said Matthew Howett, an analyst at research firm Ovum in London.

“By saying you can get LTE over it, this is their way of making them say you should be happy,” he said.

Everything Everywhere said yesterday Ofcom told the company the application would be considered in the first quarter of 2012. The operator hasn’t been informed when it may receive a license to run the services.

Vodafone welcomed Ofcom’s proposals which will “bring the U.K. closer to a fair and open auction that will benefit the wider economy and increase competition.” O2 didn’t return several calls seeking comment.

Client Losses

Everything Everywhere said in October that third-quarter sales dropped 4.3 percent as the venture continued to lose clients amid a push to shift customers to long-term contracts. The number of clients dropped 1.4 percent from the previous year after the company lost 188,000 users in the second quarter.

The operator will still need to wait for handsets and equipment for the new technology, which aren’t yet available, Howett said.

The number of U.K. operators fell to four from five after France Telecom and Deutsche Telekom in 2009 merged their British units to form Everything Everywhere, the country’s largest operator. The market may consolidate further without intervention from the regulator, Three has said.

The next auction, now scheduled for the end of 2012 after repeated delays, will sell frequencies equivalent to three- quarters of the spectrum currently being used by the operators.

The auction has been delayed for more than two years as the regulator faced legal challenges. Vodafone and O2 previously opposed restrictions on the amount of low-frequency spectrum that they could bid for.

The U.K. auction will follow the sale of low frequencies in countries such as Sweden and Germany, designed to enable operators to roll out fourth-generation networks. The German auction raised 4.4 billion euros from the disposal of airwaves previously used to broadcast television services.

Based on the amounts spent in Sweden and Germany, the U.K. auction may raise as much as 2.6 billion pounds, according to Analysys Mason, a research firm in Cambridge, U.K.

--Editors: Simon Thiel, Kenneth Wong.

To contact the reporter on this story: Jonathan Browning in London at jbrowning9@bloomberg.net

To contact the editor responsible for this story: Jonathan Browning at jbrowning9@bloomberg.net


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