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Germany prepares to launch LTE using digital dividend spectrum

T-Mobile, Vodafone and O2 win spectrum in Europe’s first digital dividend auctions

In an auction that is expected to set the stage for forthcoming 2.6GHz European auctions, total bidding in the latest German auctions inevitably commanded a lower sum than the country’s 3G auctions a decade ago. In August 2000, 125MHz of 1900/2100MHz spectrum was sold-off between six operators for just over EUR50.5 billion. In the 2010 auction, however, a far greater sum of spectrum was available - almost 360MHz across 800/1800/2600 MHz bands - but sold-off for just EUR4.3 billion. The average price per MHz per population in 2000 was a huge EUR4.92 compared to just EUR0.15 in this year’s auctions. There are three main reasons why the two auctions had such widely different outcomes. Firstly, the most recent auction attracted no new (successful) competition. But back in 2000, data services over WCDMA represented a lucrative- if untested – market opportunity, which helped to lure new competition and fuel sky high bidding. Secondly, regulation on the 800MHz proposed band for LTE is significantly stricter than prior licenses, requiring rural rollouts before urban cities are tackled. Lastly, the industry has matured in its last decade: return-on-investment (if any) from the original 3G auctions has long been a matter of debate, and the latest auction represents a re-evaluation of the value of spectrum compared to the revenue of the services it supports. No doubt Germany will be seen as a mid-priced model going forward for the pan-European digital dividend and 2.6GHz auctions, but the picture remains far from clear in terms of operator expenditure given the 135 times difference between the most expensive (Sweden) and cheapest (Netherlands) auctions seen so far.

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