Regulators are beginning to appreciate the financial struggles that operators
are facing. Consequently, they have relaxed some of the formerly tight
restrictions on auction design.
Seven countries have awarded 800MHz digital dividend spectrum to mobile
operators since the first auction of this spectrum in 2010. Our data shows a
downward trend in the value of this spectrum in Western Europe, which can be
explained by the following factors:
- A growing device ecosystem in alternative LTE bands.
- The launch of LTE networks in alternative bands before 800MHz spectrum
- Market consolidation - MNOs are bidding jointly for 800MHz spectrum, joint
ventures have been formed, and a takeover is underway in Austria. Such market
developments reduce the level of demand for spectrum.
- Stricter coverage requirements.
This Comment outlines the background to the 800MHz auctions and analyses the
reasons for the downward trend in the value of 800MHz spectrum.
The price of 800MHz spectrum has declined slightly
The 800MHz (790 - 862MHz band) is being released as a result of the switchover
from analogue to digital TV in most European countries. Some countries in
Europe are yet to complete the move to digital TV, but many have already
switched off their analogue TV transmissions and have auctioned licences in
the 800MHz band. Those countries are (in order of date of switch-off):
Germany, Sweden, Spain, Italy, Portugal, France, Switzerland and Denmark.
There has been a slight downward trend in the price of this digital dividend
spectrum since 2010 (see Figure 1). Analysys Mason expects this trend to
become more pronounced as 800MHz auctions continue to take place in Europe.
Figure 1: 800MHz auction prices in Europe, May 2010 to June 2012 1
[Source: Analysys Mason, 2012]
1 The Swiss auction is absent from Figure 1. This is because the 800MHz spectrum licences were auctioned in a multiband, combinatorial clock auction. The licences are awarded as a result of package bidding, and this format does not lend itself to simple determination of price/MHz/population for a single band.
Note: Key data/information in this graph is hidden, while in the report is not.
There are a number of possible reasons for the downward trend in the price of
digital divdend spectrum in Western Europe.
There is a growing device ecosystem in alternative LTE bands
Germany was the first Western European country to auction the 800MHz digital
dividend spectrum. Three of the four incumbent operators in Germany acquired
800MHz spectrum, and two of those operators have subsequently rolled out
800MHz networks. At this auction 800MHz, 2000MHz and 2600MHz spectrum was also
on offer. The low price paid for 1800MHz spectrum (0.025EUR/MHz/population)
can be explained in part by the high price paid for the 800MHz spectrum
(0.718EUR/MHz/population). The low price of the 1800MHz spectrum can also be
attributed to the lack of LTE equipment available for that band at the time of
Since then, the 1800MHz band has come to be considered an attractive band for
LTE. The band has typically been allocated in wide carrier channels (of 10MHz
and above) - LTE becomes more spectrally efficient with wider bands and needs
them to achieve its maximum potential throughput. The propagation
characteristics of 1800MHz spectrum, although not as favourable as those of
800MHz, are much more attractive than those of the 2600MHz band, which has
also been designated for LTE and also offers wide carrier channels. The South
Korean auction in August 2011 was an emphatic endorsement of the potential
value of 1800MHz spectrum. The spectrum in this auction reached a price of
EUR0.66/MHz/population - only 8.5% less than the price paid for 800MHz
spectrum in Germany.
In the Portuguese auction in November 2011, licences were available in the
800MHz, 900MHz, 1800MHz and 2600MHz bands. The three MNOs in the country have
announced plans to use spectrum in all three bands suitable for LTE (800MHz,
1800MHz and 2600MHz). The now well-supported device and infrastructure
ecosystem in these bands has played a part in diluting the utility, and
subsequently the value, of the 800MHz spectrum.
LTE networks were launched in alternative bands before 800MHz became available
Availability of 800MHz spectrum represented the first opportunity to acquire
the appropriate spectrum to deploy LTE in countries such as France, Germany
and Italy. However, in Denmark in 2010 for example, the regulator awarded new
frequencies for LTE in the 2.6GHz band. Four operators won licences in this
band (Hi3G, TDC, Telenor and Telia). Telia launched LTE2600 in December 2010,
and TDC launched LTE2600 services in October 2010. The existence of these LTE
networks diminished the necessity to acquire sub-1GHz spectrum for coverage.
Telia LTE network, for example, covered 75 per cent of the Danish population
by the end of 2011.
Market consolidation reduces the level of demand within spectrum auctions
Network sharing has become an important characteristic of the mobile network
industry. Operators' profit margins are being squeezed by falling ARPUs and
competitive pressure to roll out LTE networks. Regulators are beginning to
appreciate the financial struggles that operators are facing. Consequently,
they have relaxed some of the formerly tight restrictions on the auction
design - for example, by allowing joint bidding for spectrum. The effect of
this is that there are fewer buyers in the market, and the price of the
spectrum licences are driven down.
A key development in the Danish market since the 2.6GHz auction has been the
formation of the joint venture between Telia and Telenor. The companies bid
jointly for 800MHz spectrum, although they had previously bid separately for
2.6GHz spectrum. The operators only paid a price of EUR0.14/MHz/population,
which was the lowest overall average EUR/MHz/population for 800MHz spectrum in
Europe to date.
In another example of market consolidation, Net4Mobility, a joint venture
between Telenor and Tele2 in Sweden, bid jointly for 800MHz spectrum in the
Swedish auction in March 2011.
Consolidation in other European countries may also affect the price of 800MHz
spectrum. For example, the forthcoming Austrian 800MHz/900MHz/1800MHz auction
has been delayed to facilitate the proposed takeover of Orange Austria by 3
Stricter coverage requirements have devalued the spectrum
The coverage obligations on spectrum licences for the 800MHz band have become
more demanding. The German auction was notable for its coverage obligations at
the time. Before expanding coverage to the lucrative urban areas, operators
were required to cover 90% of prioritised rural zones (‘not-spots') in
the country's smallest municipalities. However, these coverage obligations
were not as strict as they might first have appeared. Only one operator had to
cover 90% of the not-spots before all operators were allowed to deploy a
service in the urban areas. Within 12 months of the first deployment, the
coverage obligations had been fulfilled in 12 of 16 federal states.
Coverage obligations have since become more onerous on MNOs, driving down the
attractiveness and price of 800MHz spectrum.
- in the French auction, there was a flat 98% population coverage obligation
- in the Swedish auction, one of the 800MHz licences contained a population
coverage roll-out obligation of 90% population coverage with 100Mbps by 2020
- in Denmark, 800MHz licensees must cover 99.8% of households and business
premises and also meet a requirement of 98% outdoor coverage (excluding
forests). Speeds achieved must be at least 10Mbps by the end of 2014.
The value of 800MHz spectrum in Europe is declining as markets mature published by Analysys Mason in July 17, 2012. This report price starts from US $ 999.