The UK's 4G auctions



Earlier this week, after years of legal wrangling, Ofcom announced its plans for an auction of 4G spectrum, which will take place in the first half of 2012. The key bidders are Vodafone, now the UK’s second most valuable company after HSBC, the Telefonica-owned 02 and the German/French combination of the curiously named Everything Everywhere. This trio all have extensive spectrum and will be bidding for more.

However, the auction will not be totally open, since – like the ongoing cricket World Cup whose rules were adjusted to ensure that India did not exit prematurely – Ofcom has introduced special provisions to accommodate the spectrum-light 3, the UK’s smallest mobile phone player. Spectrum caps have also been specified.

Encouragingly, the auction process does endorse the concept of developing the UK mobile market through competition even if the controversial – and EU-driven merger – between T-Mobile and Orange to create Everything Everywhere resulted in the four leading mobile market players becoming three.

By contrast, competition in the US looks like being eroded if this vast market becomes dominated by the duo of Verizon Wireless and AT&T, which has just announced a bid to acquire Deutsche Telekom’s US business. The other major player, the struggling Sprint, is now well off the pace.

Famously, back in 2000, the UK 3G auction raised £22.5bn, massively above expectations as the mobile companies grossly overbid for licences. This time around, sanity – rather than chutzpah – seems set to prevail. In Privatisation Revisited, published by ASI last year, proceeds for the 4G auction of up to £2 billion were projected. Whilst it is impossible to predict the eventual outcome, the final figure may top this estimate.

Some months ago, a similar 4G licence auction in Germany yielded almost £4 billion – remember, too, that the German 3G auction raised even more than its UK counterpart. Let the auction begin.