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Spectrum Valuation: Critical Strategic, Technical and Commercial Factors for Operators and Regulators

Abstract

Operators will need to consider many universal and local variables to ensure that they acquire spectrum at sustainable prices.

A record number of spectrum licences will be auctioned in 2012. Spectrum is becoming available in a wide variety of bands, facilitating the roll-out of next-generation mobile broadband networks ('4G'). Operators need to understand how to best compare and contrast the different bands to determine appropriate spectrum asset valuations. This report examines the key strategic, commercial and technical factors that should inform decision making in the run-up to spectrum auctions, and explains the results of previous auctions.

This Report answers your key questions:

  • what are the key trends in spectrum valuation?
  • is low-frequency spectrum considerably more valuable than high-frequency bands?
  • what are the key variables that affect spectrum valuation?
  • what are the policy trends that may influence spectrum prices?

Companies mentioned in this report: America Movil, Anatel, AT&T, Cell C, China Mobile, Everything Everywhere (T-Mobile), EVN Telecom, France Telecom (Orange), Globe Telecom, Hanoi Telecom (Vietnamobile), Hutchison 3G UK (3), LightSquared, Net4Mobility, Sonera, Telefonica de Espana (Movistar), Telefonica UK (O2), TeliaSonera, TELUS Communications, Verizon, Vodafone (UK) and Vodafone Espana.

Table of Contents

1 Executive summary

2 Recommendations

3 Spectrum valuation trends

  • The unprecedented number of spectrum auctions planned for
  • 3.1 2012 has generated interest in
  • spectrum valuation trends
  • 3.2 Three overarching factors inform the valuation of spectrum

4 The technical value of spectrum

  • 4.1 Lower-frequency bands are generally regarded as more valuable than higher-frequency bands
  • 4.2 The cost of interference mitigation can have an adverse effect on otherwise attractive bands
  • 4.3 Unpaired spectrum, although generally considered inferior to paired, is attracting growing interest
  • from operators
  • 4.4 The unusual abundance of harmonised LTE frequency bands may dilute the value of spectrum
  • over time

5 The commercial value of spectrum

  • 5.1 International harmonisation of the spectrum band drives the device ecosystem, which in turn
  • drives spectrum value
  • 5.2 Potential profits and the level of market development will affect the ability of operators to fund
  • the purchase of spectrum assets
  • 5.3 Spectrum prices will be affected by the challenging financial situations facing operators, coupled
  • with the difficult macro-economic conditions
  • 5.4 Operators' attention is turning from coverage to capacity concerns, increasing interest in higherfrequency
  • bands

6 The strategic value of spectrum

  • 6.1 Auction revenue is sensitive to the regulation and format of the auction
  • 6.2 The imposition of coverage obligations has a limited effect on spectrum prices
  • 6.3 Demand for spectrum is determined by the level of competition in the market
  • 6.4 Liberalisation of spectrum policy is facilitating the sharing of assets, including spectrum,
  • thereby decreasing spectrum demand and value
  • 6.5 HSPA+ could be sufficient for some operators in the short term
  • 6.6 The release of 700MHz second digital dividend spectrum would diminish operators' need to buy
  • 800MHz and 900MHz spectrum in some markets

About the authors

About Analysys Mason

Research from Analysys Mason

Consulting from Analysys Mason

List of figures

  • Figure 1.1: The three principles of spectrum valuation
  • Figure 3.1: Mobile network traffic, worldwide, 2011 - 2016
  • Figure 3.2: Number of known spectrum auctions by frequency band, worldwide, 2011 - 2013
  • Figure 4.1: Spectrum prices achieved at auction by frequency band, worldwide, 2008 - 2011
  • Figure 4.2: Number of spectrum auctions by frequency band, worldwide, 2008 - 2011
  • Figure 4.3: Spectrum prices achieved at selected 1800MHz auctions, by country, 2010 - 2011
  • Figure 4.4: Average LTE site coverage in urban areas, by frequency band
  • Figure 4.5: Spectrum prices achieved at selected 800MHz auctions, by country and lot, 2010 - 2011
  • Figure 4.6: Prices achieved for FDD and TDD spectrum at selected 2600MHz auctions, by country, 2007 - 2011
  • Figure 4.7: Planned and operational deployments of LTE networks, worldwide, February 2012
  • Figure 5.1: GDP per capita versus average mobile ARPU in Europe, 2011
  • Figure 5.2: Mobile penetration versus average mobile ARPU in Europe, 2011
  • Figure 5.3: Mobile ARPU for active subscribers, worldwide, 1Q 2004 - 3Q 2011
  • Figure 5.4: Selected mobile operators' EV/EBITDA ratio and the worldwide GDP growth rate, 2006 - 2011
  • Figure 6.1: Prices achieved for 2100MHz spectrum at auction, France, 2009
  • Figure 6.2: Prices achieved for 800MHz spectrum at auction, Sweden, 2011
  • Figure 6.3: Normalised HHI versus ARPU in Europe, 2011
  • Figure 6.4: Key elements of HSPA+, LTE and LTE Advanced
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