U.K. LTE Auction: Disruptive or Not?

The U.K. Long Term Evolution spectrum auction is over, and the results might surprise some observers. Some had thought there would only be enough spectrum for three winners of the 800 MHz spectrum, a result that would have put one of the leading four U.K. service providers at a disadvantage.

Instead, not only did all four leading providers win 800 MHz spectrum, but BT is getting back into the mobile business as a spectrum-owning, facilities-based provider, using the 2.6 GHz band. 

As it turns out, the auctions will not potentially disrupt the existing market in the sense that one of the leading four mobile service providers would have been shut out of 4G spectrum ownership. Instead, all four leading providers will have their own LTE spectrum. 

But BT is getting back into the mobile business on a facilities-based basis. And that could shake up market dynamics. In that sense, the auctions are potentially disruptive.
Also, the winners bid in a rational way, as shown by the total sums the contestants bid to win their licenses. Though some had feared overbidding by the contestants, the auction actually raised less money than the U.K. government had expected, based on the earlier Netherlands auction.

The auction raised £2.34 billion ($3.61 billion) for the government, but some had forecast the auction would raise £3.5 billion.

Though arguably not as good for the government, the license fees will be helpful for the contestants themselves, who did not “overbid” for licenses, as was the case with 3G auctions.

After more than 50 rounds of bidding, Everything Everywhere Ltd, Hutchison 3G UK Ltd, Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc), Telefónica UK Ltd and Vodafone Ltd have all won new Long Term Evolution spectrum in the United Kingdom.

Of those four service providers, only one--Telefónica UK Ltd.--has a “universal service obligation related to its use of coveted 800-MHz spectrum. .

Telefónica U.K. Ltd. must provide a mobile broadband service for indoor reception to at least 98 percent of the U.K. population (expected to cover at least 99 percent when outdoors) and at least 95 percent of the population of each of the U.K. nations – England, Northern Ireland, Scotland and Wales – by the end of 2017 at the latest.

A total of 250 MHz of spectrum was auctioned in two separate bands – 800 MHz and 2.6 GHz. This is equivalent to two-thirds of the radio frequencies currently used by wireless devices such as tablets, smartphones and laptops.

The lower-frequency 800 MHz band is better for widespread mobile coverage, while the 2.6 GHz band offers higher capacity.

Spectrum Results

Winning bidder	Spectrum won	Base price
Everything Everywhere Ltd	2 x 5 MHz of 800 MHz and 2 x 35 MHz of 2.6 GHz	£588,876,000
Hutchison 3G UK Ltd	2 x 5 MHz of 800 MHz	£225,000,000
Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc)	2 x 15 MHz of 2.6 GHz and 1 x 20 MHz of 2.6 GHz (unpaired)	£186,476,000
Telefónica UK Ltd	2 x 10 MHz of 800 MHz (coverage obligation lot)	£550,000,000
Vodafone Ltd	2 x 10 MHz of 800 MHz, 2 x 20 MHz of 2.6 GHz and 1 x 25 MHz of 2.6 GHz (unpaired)	£790,761,000
Total		£2,341,113,000