5G spectrum auction is “a steal” for UK telcos

By Ellen Daniel

Mobile network operators made a “steal” after the UK’s latest 5G spectrum auction only raised £1.36bn, well below what analysts had predicted.

During a spectrum auction, the government sells off the right to transmit signals over different parts of the limited amount of spectrum available. In the UK, this is overseen by Ofcom. In this particular auction a total of 200 MHz of spectrum was available to bid for: 80 MHz of spectrum in the 700 MHz band and 120 MHz of spectrum in the 3.6-3.8 GHz band.

EE, Three, O2 and Vodafone all participated in the auction, with EE spending £452m. The auction will now move to the “assignment” stage in which companies can bid for different frequency positions.

Ahmed Essam, chief executive of Vodafone UK, said: “This auction will boost our 5G network capacity. It means we will have the spectrum we need to further the roll-out of 5G to our customers, bringing high speed connectivity and opening up new opportunities for products and services. We have been successful in the 3.6 GHz band and have avoided expenditure on low band spectrum, where it is our strategy to reaffirm over time our significant 900 MHz holdings to carry 5G traffic.”

According to Ofcom, the auction will increase the total amount of spectrum available for mobile technology by nearly a fifth and will “improve mobile services and support 5G”.

However, the total amount raised by the auction, which goes to HM Treasury, has been described as a “steal”. The reserve price was £1.1bn and the total amount raised was only just higher than this.

In comparison, in 2000 the Radiocommunications Agency, which is now known as Ofcom, raised £22.5bn in a 3G spectrum action. The 4G spectrum auction in 2013 raised £2.3bn.

Shares in BT and EE rose by nearly 6% as a result of the spectrum action, with Vodafone share increasing by 1.2%.

While the UK government may have been hoping to raise more from the auction, UK telcos will now have spare funds to spend on other elements of 5G rollout.

Peter Grimmond, head of technology EMEA at Veritas Technologies, said: “With the latest round of 5G auctions closed, and operators at the ready, the countdown to an edge data explosion has started. Businesses will need to prepare for a rapid uptick in the volumes of data that they need to manage at the edge, after mobile network operators secured 5G spectrum licences for a steal.

“UK operators will be able to increase spectrum by over 22% as a result of today’s auctions and, at a cost of only £1.36bn, are likely to have the money in the bank to accelerate investment in the backend infrastructure required to deliver much greater capacity.  UK businesses now have a pace-setter for the evolution of their data management strategies and need to work to parallel timelines if they want to avoid another transformation gap appearing.  Enterprises need to start evolving their data management strategies now, if they’re going to be ready.”

Read More: Ericsson launches RAN Slicing in boost for 5G monetisation.