Announcement of the results of the spectrum auction in the Netherlands increases expectations of the UK 4G auction.

17 December 2012

Brian Potterill, director in PwC's telecoms strategy team, added:

"The results of the spectrum auction in the Netherlands were announced late on Friday (14 December), raising a total of €3.8bn. As with the recent auction in Ireland which raised €855m the Dutch auction included more spectrum than on offer in the UK's 4G auction so is not directly comparable, but does suggest the UK prices will be towards the high end of expectations.

"In the Autumn Statement the Chancellor budgeted for proceeds of £3.5bn, which is comfortably within PwC's expected range of £2bn-£4bn. The result of the auction in the Netherlands is bound to add to confidence that the £3.5bn will be achieved.

"The high prices in the Netherlands were caused by the government setting aside some of the most valuable 800MHz spectrum for a 4th operator. This created a squeeze which drove up prices. The UK 4G auction is designed to ensure that a 4th operator can get a credible portfolio of spectrum but doesn't specifically set aside the valuable 800MHz, so it is unlikely that we will get the same squeezed conditions from the larger operators. However, the Netherlands result adds to the sense that mobile spectrum is increasing in value as demand for Smartphones grows.

"Another interesting aspect of the Netherlands auction is the prices paid for the spectrum not included in the UK auction. After the 4G auction Ofcom plans to impose annual fees for this other spectrum based upon its value. The mechanism for setting these fees has not yet been finalised but Ofcom's draft proposals and the Netherlands prices would suggest the industry will have to pay more than £600m in annual fees: a ten-fold increase on what they currently pay for this spectrum.

"Ofcom plans to announce the applicants for the UK auction before the new year. The auction will start in earnest at the end of January with results expected in early March."

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