Telekom Austria Wins Half of LTE Spectrum

Once again, it seems, next generation mobile spectrum auctions have a mobile service provider caught between a rock and a hard place.

Telekom Austria won licenses to half  of the 4G spectrum sold recently by the Austrian Telecom Control Commission. That's the good news. The bad news is the debt load the purchase will impose.

Executives with long memories will remember what happened when many mobile service providers overbid for 3G spectrum. Several firms faced bankruptcy when revenues did not grow enough to justify the payments.

The Austrian Telecom Control Commission said the EUR2.01 billion ($2.75 billion) sale had Telekom Austria AG paying about EUR1.03 billion for 14 frequency blocks, while Deutsche Telekom AG's Austrian subsidiary T-Mobile paid around EUR654 million for nine frequency blocks. Hutchison paid about EUR330 million for five blocks of spectrum.

The good news for Telekom Austria is the strategic spectrum advantage it will have.

Compare the 3 Austria holding of about 18 percent of  Long Term Evolution spectrum auctioned, or T Mobile’s 32 percent holding.

It is possible 3 Austria will face capacity constraints, eventually.

But the costs of acquiring so much spectrum will be costly for Telekom Austria. The acquired spectrum costs will increase its net debt to 3.3 times earnings before interest, tax, depreciation and amortization, risking a credit downgrade.
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