Ofcom announces winners of UK 4G auction

On 20 February Ofcom announced the winners of the UK 4G spectrum auction. The four existing UK mobile network operators (EE, H3G, O2 and Vodafone) as well as BT subsidiary Niche Spectrum Ventures all won spectrum, while new entrants MLL Telecom and HKT participated but did not win any spectrum in the multi-band auction. According to Ofcom the winners will use their assignment of digital-dividend spectrum for the roll-out of 4G technology over the coming months. The auction raised revenues of just over £2.3bn.

Spectrum allocation and base prices payable by the winners:

  • Everything Everywhere won 2x5MHz of 800MHz and 2x35MHz of 2.6GHz for £589m.
  • Hutchison 3G won 2x5MHz of 800 MHz for £225m.
  • Telefonica O2 won 2x10MHz of 800 MHz with coverage obligations for £550m.
  • Vodafone won 2x10MHz of 800 MHz, 2x20MHz of 2.6 GHz and 25MHz of unpaired 2.6GHz for £791m.
  • Niche Spectrum Venture won 2x15MHz of 2.6GHz and 20MHz of unpaired 2.6GHz for £186m.

All winners will compete in another round of bidding shortly to determine the location of their assignments within the two spectrum bands. The revenue from this so-called assignment round is expected to be small compared to the overall revenue.

While the auction revenue of £2.3bn stayed below some analysts’ estimates, the auction is considered a full success by the five winners as well as by Ofcom. All winners announced that they are “extremely pleased” with the result of the auction, which they consider “great news” and “a landmark moment” for UK consumers. The operators and Ofcom agree that the spectrum assignment enables roll-out of “super-fast” 4G services which, according to Ofcom’s estimates, will generate consumer benefits of more than £20bn over the next ten years. Furthermore, the auction outcome meets Ofcom’s objectives of at least four credible national wholesalers of 4G services and of widespread 4G coverage to at least 98% of the UK population.

The UK 4G auction used a novel variant of the CCA auction format, which was developed by DotEcon for Ofcom. The lot structure of this multi-band auction included fungible lots in the 2.6GHz band and an abstract lot with attached coverage obligations in the 800MHz band. The auction rules employed spectrum caps to safeguard against extremely asymmetric spectrum assignments, and special spectrum portfolios, which reserved spectrum for eligible bidders to enable credible competition in the downstream market. The bidder-specific prices were determined via an opportunity-cost based second price rule.

DotEcon worked on various aspects of the award process over the course of several years. DotEcon advised Ofcom on the design and implementation of the auction, which was run using DotEcon’s WebBidder auction platform. For further information on the auction outcome see Ofcom’s press release.



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