UK: Blow to Osborne as 4G auction raises less than Government estimates
08:36 20 February 2013
Chancellor George Osborne was dealt a blow today after the auction of superfast 4G airwaves raised a smaller-than-expected £2.3 billion.
All the major mobile phone companies - EE, Hutchison 3G, O2 parent Telefonica and Vodafone - were successful in the bidding process, while a subsidiary of BT also picked up a licence from Ofcom.
The regulator had placed a reserve price of £1.3 billion on the 4G sale, but today’s total is still much less than the £3.5 billion estimated by the Government’s tax and spending watchdog in the Autumn statement.
The previous 3G auction raised £22.5 billion for the Treasury in 2000.
The bidders in the 4G version competed to buy airwaves in two separate bands - the higher frequency 2.6 GHz and lower frequency 800 MHz - with 28 lots up for grabs.
After more than 50 rounds of the auction, Vodafone was the highest bidder paying £790.8 million for a mixture of the lower and higher bands.
EE, formed from the merger of Orange and T-Mobile, already has access to 4G and was the first to offer a 4G network in the UK. It was the second highest bidder paying £588.9 million for its airwaves.
Vodafone UK chief executive Guy Laurence said: “We’ve secured the low frequency mobile phone spectrum that will support the launch of our ultra-fast 4G service later this year. It will enable us to deliver services where people really want it, especially indoors. This is great news for our customers.”
Under the deal O2’s Telefonica has won a spectrum which must provide mobile broadband services for indoor reception to a least 98% of the UK population, and at least 95% of the population in each of the UK nations - England, Northern Ireland, Scotland and Wales - by the end of 2017 at the latest.
Ed Richards, Ofcom chief executive, said: “This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country. We are confident that the UK will be among the most competitive markets in the world for 4G services.
He said: “4G coverage will extend far beyond that of existing 3G services, covering 98% of the UK population indoors - and even more when outdoors - which is good news for parts of the country currently under-served by mobile broadband.”
The two losing bidders were Hong Kong Telecom owner PCCW and private-equity backed Buckinghamshire-based firm MLL, which supports fixed and wireless services in the UK.
BT, which paid £186.5 million for its licence, said it did not intend to build a national mobile network.
Chief executive Ian Livingston said: “Instead, this spectrum will complement our existing strategy of delivering a range of services using fixed and wireless broadband. We want our customers to enjoy the best possible connections wherever they are and this spectrum, together with our investment in fibre broadband, will help us achieve that.”
Ofcom said that by 2030 demand for the mobile data could be 80 times higher than today and it was planning for a further spectrum for possible future 5G mobile services.
4G services should make it much quicker to surf the web on mobiles, giving speeds close to home broadband services and allowing consumers to stream high-quality video, watch live TV and download large files.
For the typical user, download speeds of initial 4G networks will be at least five to seven times faster than those for existing 3G networks.
This means a music album that takes 20 minutes to download on a 3G phone will take just over three minutes on 4G.