Thomas-Wehmeier_web

This post is by Thomas Wehmeier, Principal Analyst, Operator Strategies, Informa Telecoms & Media

Following swiftly on from EE’s launch of the UK’s first live 4G network just a few weeks ago, today marks the next important milestone in the establishment of a genuinely competitive market for 4G services in the UK.

The passing of today’s deadline for prospective bidders to submit applications takes us one step closer to the completion of the highly controversial, long-awaited and largest ever auction of spectrum in the UK. Bidding itself won’t actually start for real until January and we’re likely to see weeks of intensive bid rounds until the results proper are finalised by February or March next year.

As far as the UK’s mobile operators are concerned, this can’t happen soon enough. Despite the encouraging signs we’ve seen since EE went live, the UK is still lagging far and away behind the world’s most advanced 4G market(s). To put it context, by the time the remaining 4G networks are switched on at some point in the middle of next year, more than one-third of Korean and about 20% of Japanese consumers will already be actively using 4G services in their respective countries.

But that’s not to say that we don’t expect to see a marked acceleration in the pace of 4G adoption in the UK next year. By that point, most of the high-end flagship phones on sale in the UK will support 4G technology, we can expect to see some pretty competitive pricing as the markets kicks into life and the inevitable blanket market campaigns are sure to lift interest in and adoption of 4G amongst UK consumers.

How much is the auction expected to raise and who will bid?

It’s fair to say we’re expecting the amount raised to represent just a fraction of the record £22.5 billion spent during the 3G licensing round in April 2000. We have to remember that those were exceptional times, before the dotcom bubble burst and at the height of hype around mobile, and the industry will be much more cautious this time around, not least because of the weak economy and the declining revenues that many operators are suffering in the UK and across Europe.

In his recent Autumn Statement, the UK Chancellor George Osborne pegged the amount the UK Treasury is hoping to raise at £3.5 billion, which puts the official view slightly above industry expectations, but broadly on par with the amounts raised in similar auctions in other European markets such as Germany.

We’re expecting the auction to attract all the usual suspects , meaning the UK’s existing mobile operators Vodafone, Telefonica O2, 3 UK and, of course, EE, who’ll be looking to bolster their existing 4G spectrum position.

What we don’t know and can’t predict is whether we’ll see any wildcard bids. There’s been plenty of industry speculation about the possibility of some of the UK’s other telecoms and media powerhouses, the likes of Virgin Media, Sky or BT, entering the fray, but the experience of looking to other markets that have held similar auctions means we should be surprised if there is a genuinely disruptive and large-scale bid from one of the players. It can’t be ruled out, but it would certainly be unexpected.

The LTE World Summit, the premier 4G event for the telecoms industry, is taking place on the 24th-26th June 2013, at the Amsterdam RAI, Netherlands. Click here to download a flyer for the event.

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