Ofcom Wraps Principal Stage of Latest Spectrum Auction

Sale of crucial airwaves will help cement the UK’s strong start in 5G

After less than a week of bidding, Ofcom confirmed this morning the results of the principal stage of the eagerly awaited sale of spectrum in 700 MHz and 3.6 GHz to 3.8 GHz frequencies. The auction raised just under £1.4 billion and increases the total amount of available spectrum in the UK by nearly a fifth.

The swift conclusion and modest overall spending are good outcomes for the UK regulator and consumers alike, with no one operator emerging as either a big winner or big loser. In fact, all four main providers said they were satisfied with the results. Operators are expected to begin deploying the spectrum in the coming months.

Avoiding a protracted bidding war will come as a relief to operators as they prepare for another round of costly network deployment. It’s a far cry from the £22.5 billion splurge on 3G licences in the UK at the turn of the century.

EE, Three and O2 scooped spectrum in the 700 MHz band, which is best-suited to achieving wide-area, rural and in-building coverage. This was particularly important to EE and Three, which came into the auction lagging in low-band frequencies. Each of the three mobile operators spent £280 million on two lots of 10 MHz of paired spectrum, with EE committing an additional £4 million for 20 MHz of supplementary downlink.

Vodafone was the only operator not to win 700 MHz spectrum, but new UK CEO Ahmed Essam strongly hinted that the band wasn’t a priority. He commented that Vodafone had “avoided expenditure” and will instead seek to gradually repurpose its strong 900 MHz holding for 5G services.

Coming into the auction with the smallest amount of spectrum holdings, O2 may be the most satisfied with the outcome. In winning both low- and mid-band spectrum, it has increased its overall holding by a third. This will be crucial to support the more than 35 million mobile customers that use its network.

Three was the only operator not to grab any spectrum in the 3.6 GHz to 3.8 GHz band. However, I don’t believe these frequencies were a priority for the operator, as it already has a very strong mid-band position since acquiring UK Broadband in 2017. Instead, the 120 MHz of these frequencies were evenly distributed between EE, O2 and Vodafone. EE and O2 paid £168 million, and Vodafone paid £176.4 million.

Beyond the four main network operators, there was no interest from other companies. At CCS Insight we’re often asked whether big tech companies like Google, Amazon or Microsoft may one day seek to acquire mobile spectrum. However, these auctions by their nature are very local and bring only limited opportunities for large Internet companies.

The auction process now moves to the assignment stage, in which companies bid for their preferred frequency positions. This is important because owning contiguous blocks of spectrum is a central enabler of many future 5G services. Competition in this phase could be more heated than in previous auctions as Vodafone and O2, for example, reportedly raised concerns about the “fragmented” nature of the sale.

The UK was fast out of the blocks with early 5G network launches in 2019, but the Covid-19 pandemic and the government’s ban on Huawei equipment have been hurdles to its progress. Now, with new spectrum under their belts and at lower prices than most had expected, UK operators can get set for the next stages of their 5G journey.