German auction: it's about 900/1,800 MHz bands not 700 MHz

Thursday 23 April 2015 | 16:08 CET | Market Commentary

German network regulator BNA unveiled that the planned multi-spectrum auction including 700 MHz spectrum will take place on 27 May. The three participants are the mobile operators already active in Germany: Telekom Deutschland, Vodafone Germany and Telefonica Deutschland. The auction includes a total of 270 MHz including 220 MHz paired in spectrum blocks and 50 MHz in unpaired spectrum blocks. The paired spectrum blocks include six blocks of 2x5 MHz in 700 MHz band, seven blocks of 2x5 MHz in the 900 MHz band, and nine blocks of 2x5 MHz in the 1,800 MHz band. The unpaired blocks amount to eight blocks of 5 MHz in the 1,500 MHz band that can be used for Supplemental Downlink (SDL). The auction will yield EUR 1.5 billion if all blocks are bid for at the minimal amounts set by the regulator.

At first glance the multi-spectrum auction looks similar to the 2010 auction which yielded a record amount of EUR 4.39 billion of which the majority was spent on the 800 MHz spectrum (EUR 3.58 billion) thus setting the bar high for other European spectrum auctions including 800 MHz. As the upcoming auction is to be the first in Europe for 700 MHz spectrum one might expect a similar development.

However, the market situation has changed with Telefonica Deutschland acquiring E-Plus decreasing the number of MNOs to three. In 2010, the bidding for 800 MHz was intense as all four operators wanted one of three blocks (2x10 MHz) which fuelled higher bidding. A similar situation occurred in the Netherlands where newcomer Tele2 bid for the reserved block thus leaving 2 blocks for the three MNOs leading to a bidding war with eventually T-Mobile Netherlands losing out on that spectrum. As the 700 MHz spectrum is divided in three blocks of 2x10 MHz and there are only three participants a high yield as in 2010 is to not be expected.

The 900 MHz and 1,800 MHz spectrum could spark a bidding war as the regulator set a cap of 2x15 MHz (3 blocks) per operator for 900 MHz spectrum to protect the current infrastructure and there are only seven blocks available. In the 1800 MHz spectrum 10 blocks of 2x5 MHz are available but this spectrum is already in use for LTE services by Telekom Deutschland and Telefonica Deutschland (E-Plus). This could lead to more intense bidding as both operators will want to keep their current blocks to ensure as little as possible change to their current network architecture and infrastructure.

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