The results of the auction of wireless spectrum for mobile services in the Netherlands were unveiled last Friday (14 December 2012) by the Dutch spectrum agency Agentschap Telecom with prices reaching a total of €3.8bn (£3.0bn).
The amount raised was higher than expected and indicates that while prices are well below that raised for 3G, the rise of smartphones is pushing the cost of spectrum up.
The three dominant players in the Dutch market, KPN, Vodafone and Deutsche Telekom, all won licences for the 4G spectrum, along with a new entrant Tele2 of Sweden. Tele2 is already present in the Dutch market as an MVNO, but will now build out its own network.
The market leader KPN has warned that the high cost of the licences means it will have to cut dividends to afford them. The high prices also put off another bidder, the cable companies Ziggo and UPC, owned by Liberty Global, who made a joint bid, but withdrew from the auction after the prices rose too high.
The auction is the largest of its kind in Dutch telecommunications history with 41 separate licences up for grabs. Some licences will begin in 2013 with most running for 17 years. The Netherlands has a total of 19.6 million mobile phone subscriptions – higher than the actual population.
Vodafone Netherlands paid - €1.38bn; KPN - €1.35bn; T-Mobile - €911m; and Tele2 – €161m.
Vodafone acquired spectrum in the 800MHz, 900MHz, 1800MHz and 2100MHz bands; KPN bought spectrum in the 800MHz, 900MHz, 1800MHz, 2100MHz, and 2600 MHz as well. T-Mobile acquired spectrum in the 900 MHZ, 1800 MHz and 1900 MHz bands and Tele2 bought spectrum in the 800 MHz band.
KPN and T-Mobile also acquired unpaired spectrum in the 2.6GHz-band. T-Mobile bought two unpaired blocks in the 1900MHz band. The three operators already hold unpaired spectrum in the 1900MHz band.
The auction result:
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Analyst comment: Implications for UK spectrum auction
Brian Potterill, director in PwC's telecoms strategy team, said: ‘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.
Potterill continued: ‘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,' said Potterill.
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 2013 with results expected in early March.
See also: Irish multi-band mobile spectrum auction raises €854.64 million