The UK 4G auction winning bidders are announced by Ofcom to deliver future mobile competition

21 February 2013

Colin Long

The UK’s long-heralded auction of LTE/4G spectrum (800MHz and 2.6GHz) is nearing conclusion after four weeks and 56 rounds of bidding. The winners have already been determined and have bid a base total of £2.34 billion (US$3.61 billion) [1].

This auction is the most significant release ever of spectrum to the market, a total of 250MHz, and, in Ofcom’s words, “likely to be the last significant opportunity to obtain prime mobile spectrum for many years”.

The essential legal driver behind Ofcom’s proposal was direct Government legal intervention in 2010: a never-before-used instrument enabled by UK wireless telegraphy legislation, in the form of Directions issued to Ofcom by the Secretary of State.  The main requirements in these Directions as regards 4G spectrum were that:

  • Ofcom should make regulations for an auction of licences to utilise frequencies in the 800MHz and 2.6GHz bands, ‘as soon as reasonably practicable’ after carrying out a competition assessment.

  • This competition assessment should be in respect of the future competitiveness of mobile electronic communication services markets after the conclusion of the auction, taking into account possible effects of the auction.  It should also include consideration of ‘the potential for new entry into those markets’.

  • In light of the competition assessment, Ofcom should, where they think fit, put in place ‘appropriate and proportionate’ measures which would promote competition in those markets after the conclusion of the auction, including in the rules governing the auction itself.

Ofcom went through a protracted and at times contentious three-stage public consultation process before starting the Auction process in late January 2013. The essential features of the final proposals were:

  • Reservation of a portfolio of spectrum bands for a fourth national wholesaler, either H3G or a new entrant.

  • Safeguard caps on the amount of spectrum that would be allowed to be held by any wholesale operator following the Auction: an overall cap of 2 x 105MHz and a sub-1GH spectrum cap of 2 x 27.5MHz.

  • A coverage obligation  to apply to a 2 x 10MHz lot within the 800MHz band, which will be both frequency and technology neutral.  However the licensee will be able to meet the obligation with any frequencies that it is permitted to use.

  • Spectrum packaging in the form of two types of lot for the 800MHz band (one for the 2 x 10MHz with the coverage obligation and the other for the remainder in lots of 2 x 5MHz); for the 2.6GHz band, 2 x 5MHz lots for paired and 5MHz lots for unpaired spectrum.

  • Reserve prices for the two different lot categories: £1.15 billion for 60MHz of 800MHz spectrum, £330 million for 190MHz of 2.6GHz spectrum, a total reserve price of £1.48 billion. 

  • Spectrum trading to be permitted for individual standard-power licences; low-power licences at 2.6GHz to be tradable only where the number of licensees in the band is not increased. (Ofcom will consider after the Auction whether to allow leasing of mobile spectrum licences generally).

  • Licences to be of indefinite duration, with an initial period of 20 years and thereafter revocable for spectrum management reasons on 5 years’ notice.

  • The level of annual licence fees for already licensed 900MHz and 1800MHz spectrum to be adjusted after the Auction to reflect full market value having regard to the sums bid in the auction for 800MHz and 2.6GHz spectrum.

The format chosen for the Auction was a ‘Combinatorial Clock Auction’ consisting of three rounds: an opt-in round (where those bidders that are eligible to opt in decide whether to make bids at the reserve price for a set of minimum portfolio packages); a series of primary bid rounds during which Ofcom set prices in light of excess demand and bidders respond to the changes in prices with revised bids until there is no longer excess demand for any of the lot categories; and a supplementary bids round during which bidders could update the amounts of their bids on packages they bid on in the primary rounds and bid on different packages.
The winning combination for lots is the one for which the sum of bid amounts plus the reserve price in respect of any unsold spectrum is highest. The price that each winner pays is set according to the ‘second-price’ rule.

In the end, out of seven original applicants [3], five, the four existing mobile operators and one re-entrant to the mobile sector – BT, were successful, as below:

Winning bidder

Spectrum won Base price

Everything Everywhere Ltd 

2 x 5 MHz of 800 MHz and
2 x 35 MHz of 2.6 GHz 


Hutchison 3G UK Ltd  2 x 5 MHz of 800 MHz £225,000,000
Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc)2 x 15 MHz of 2.6 GHz and
1 x 20 MHz of 2.6 GHz (unpaired) 
Telefónica UK Ltd 2 x 10 MHz of 800 MHz
(coverage obligation lot)
 Vodafone Ltd 2 x 10 MHz of 800 MHz,
2 x 20 MHz of 2.6 GHz and
1 x 25 MHz of 2.6 GHz (unpaired)
Total   £2,341,113,000


BT’s entry is interesting but does not appear to be a direct threat to the incumbents - it has stated it does not intend to build a national network. The spectrum it has won could be used for a metro hot zone type of data network, especially in combination with its Wi-Fi value proposition [4].

The Government, relying on external expert advice and civil servants, had expected or at least hoped that a total £3.5 billion would be raised, so the result has fallen nearly £1.2 billion short of that figure. However, latterly many industry pundits were predicting that such a figure was over-optimistic and so events have proved. One expert consultant [5] has already said that on the basis of the German 4G auction and using a £/MHz/Pop like-for-like comparison, the UK auction came in at £0.15/MHz/Pop or c.£600M below the German benchmark (£0.19/MHz/Pop).

The prices bid will have been influenced by a number of factors, such as the current fragile state of the UK economy, the investment required to build LTE networks, the uncertain consumer response and take-up, and the fact that the four in addition to Everything Everywhere other incumbent operators are about to be permitted to re-farm existing licensed frequency bands (900MHz, 1800Mhz and 2.1GHz) in order to use LTE 4G technology.

Once the auction fees have been paid and the new licences issued, we can anticipate that there will be rapid deployment of LTE technology, by the likes of Vodafone and Telefonica in particular, especially to try to close the marketing gap opened up following Everything Everywhere being authorised by Ofcom in August 2012 to convert its 1800MHz spectrum to LTE use.

For further information please contact:

Colin Long


[1] subject only to paying small additional sums for final assignment of individual numbered frequency lots
[2] i.e. that by 31 Dec 2017 (i) users in an area within which 98% of the UK population lives should be able to receive a 2Mbps mobile broadband service both outdoors and at some indoor locations within the vast majority of premises; (ii) licensee to provide the same 2Mbps service to an area in which 95% of the population of each nation (i.e. England and Wales, Scotland and Northern Ireland)lives

[3] This lot was aquired by telefonica UK. The losing bidders were PCCW and MLL Telecom

[4] per Trova Consulting

[5] Trova