Kester Mann, senior analyst, Operators at CCS Insight comments:
The upcoming 4G auction will be the largest ever sale of spectrum in the UK, boosting the amount of airwaves available by 75% and playing a critical role in meeting the demands of one of Europe’s most data-hungry markets. We can expect some intensive bidding over the next few weeks as the UK 4G auction process gets under way.
The recent spectrum auction in the Netherlands raised almost three times more than expected, which could be a worrying development for UK operators already under revenue pressure. While the results and winners will be confirmed in February or March, the presence of new players in the bidding process is likely to drive higher the amount raised for the government’s coffers. However, we do know that it will remain far short of the £22.5 billion received from the 3G auction in 2000.
The participation of three new players (BT, PCCW and MLL) in the process could put pressure on 3, which was understood to have been earmarked by Ofcom as the likely ‘4th operator’ to gain a minimum spectrum holding below 1GHz. Should 3 fail to acquire frequencies at 800MHz, its long term prospects in the UK market would be severely dented. Sky, TalkTalk and Virgin Media were all touted as potential bidders. However, the lack of greenfield 4G operators in most other European markets means that their absence in the process is unsurprising
EE will have undoubtedly gained a head-start of at least 6 months by the time its rivals launch. However, its failure to focus on new services instead of just speed could allow the UK’s other operators to rapidly close the gap. EE’s entry tariff priced at £36 per month at offers a disappointing 500MB of data – enough for only a couple of hours streaming for example on the BBC iPlayer. It faces a delicate conversation at point of sale to upgrade customers who are currently paying the same amount for unlimited data with T-Mobile’s Full Monty plan. We believe EE needs to more strongly articulate services such as Clone Phone, EE Film or the free access to BT Wi-Fi offered within its tariffs
The roll out of LTE will be faster than any new network we have seen in the UK and we can expect coverage and capacity to be a fierce battleground for operators in 2013, and crucial to initial perception of the technology among consumers. The new licensees will likely launch commercial services in May or June 2013 so we can expect the winners to adopt a more aggressive pricing policy than deployed by EE as the fight to sign up 4G customers gathers pace
Despite the strides taken by EE in recent months, the UK still lags behind the leading 4G markets such as South Korea, USA and Japan. In fact, by the time EE has competition, South Korea is likely to have close to 40% of its mobile customers already using 4G networks
As in other markets, the 800MHz spectrum will prove most desirable; mobile signals travel further at lower frequencies thereby boosting coverage potential. One of the 800MHz lots will carry an obligation to provide mobile broadband coverage indoors to 98% of the population by end-2017