Bloomberg News

U.K. Mobile Auction Draws 7 Bidders Including Vodafone

December 20, 2012

Vodafone Group Plc (VOD) and Telefonica SA (TEF) are among seven bidders in an auction for frequencies to carry faster wireless services in the U.K.

Other bidders include mobile-phone operators Hutchison Whampoa Ltd. (13) and EE, the British venture of Deutsche Telekom AG (DTE) and France Telecom SA, as well as fixed-line company BT Group Plc (BT/A), network service supplier MLL Telecom Ltd. and Hong Kong phone company HKT, regulator Ofcom said in a statement today. The auction for spectrum to run so-called fourth-generation services will start next month.

Faster networks are key for carriers as consumers flock to smartphones such as Apple Inc.’s iPhone and handsets based on Google Inc.’s Android system to download music, watch videos online and surf the Web. The U.K. auction will offer spectrum in two separate frequency bands, 800 MHz and 2,600 MHz, and increase the amount of airwaves available to mobile phones by more than 75 percent, Ofcom said.

“The good news for the government is that having seven bidders should help to maximise revenue from the auction,” said James Walsh, head of telecommunications at law firm Eversheds.

Vodafone on Dec. 17 dropped the most in more than a month in London trading on concern that its 1.4 billion-euro ($1.85 billion) spectrum purchase in a Dutch auction will herald higher prices in other markets. Today, the stock was down 0.6 percent at 155.65 pence as of 12:43 p.m. Telefonica dropped 0.1 percent in Madrid, Deutsche Telekom declined 0.1 percent in Frankfurt and France Telecom was down 0.7 percent in Paris.

Economic Situation

The 4G auction is incomparable to the previous 3G auction, which raised 22.5 billion pounds at the height of the dotcom boom, Ofcom chief executive officer Ed Richards told journalists in London today, citing a sluggish U.K. economy.

The objective of the auction was “to create long-term economic benefits, not maximise upfront revenue,” he said.

In his autumn statement this month, U.K. Chancellor of the Exchequer George Osborne included a projection of raising 3.5 billion pounds from the 4G auction.

Ofcom in November said it wants to raise at least 1.3 billion pounds, prior to the Dutch auction that then raised 3.8 billion euros. Ofcom said it “looked at the amounts paid by operators in other markets and then adjusted this for the U.K.’s circumstances.”

Valuable Frequencies

To maintain at least four national operators in the market, Ofcom will impose maximum and minimum amounts of spectrum that Vodafone and other operators can bid for and reserve spectrum exclusively for a fourth operator. Hutchison Whampoa’s Three U.K. is currently the fourth largest U.K. operator.

All the companies are seeking access to the valuable 800 megahertz band of low-frequency spectrum that can travel long distances with fewer expensive base stations.

EE, the No. 1 wireless company in the U.K., already started selling its faster 4G offering in 10 cities. Vodafone and others had tried to prevent EE from offering the service before they were able to secure the spectrum they need to offer their own. Vodafone may be able to offer the service in the U.K. by the middle of 2013. Hutchison Whampoa’s Three will begin 4G services next year, using spectrum acquired from EE.

To contact the reporter on this story: Sam Chambers in London at schambers7@bloomberg.net

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


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