UK Operators Could Pay £1 Billion For 800MHz Spectrum In 2012 Auction
Mobile operators in the UK are expected to pay around £1 billion each to purchase spectrum on the 800MHz band when it is auctioned alongside the 2.6GHz frequency in 2012.
According to research conducted by Pricewaterhouse Coopers (PwC) the £1 billion purchase price is considerably less than the £22.5 billion operators paid back in 2000.
Both the 800MHz and 2.6GHz frequencies are scheduled to be auctioned next year and will be used by the mobile operators to provide LTE 4G mobile broadband services in the UK.
PwC telecoms team senior manager Simon Harris said: “The structure of the auction will have an important bearing on the prices paid, but a similar outcome to Germany would not be surprising – in which case an operator may expect to pay up to around £1bn for an 800 MHz licence.”
An Ofcom spokesperson said: “This spectrum is of enormous significance to the future of the UK economy and society as its release will allow the next generation of mobile broadband technology to be deployed quickly and efficiently.
“How much bidders will be willing to pay to acquire it will only become clear when the auction takes place – and this is not a matter that Ofcom considers when taking decisions.
It is very difficult to use historical auction data to forecast future prices for spectrum since the licence terms differ widely across the globe. For example, in the US, auction winners can enjoy their spectrum in perpetuity with only annual administrative fees, while in Europe many regulators impose incentive fees (based on revenue) and the expiry dates could mean another auction.
Another factor to consider is the auction format. The UK is using a combinatorial clock auction (CCA) and many countries have used simultaneous multiple round (SMR) auctions. The bidders in the UK auction will not necessarily pay their value for the spectrum since the CCA auction solves a winner determination problem after the sealed bid round and once the winners are determined, a series of algorithms are run to determine the second prices that the winners will pay for the licences.