U.K. Won’t Reserve Spectrum for Everything Everywhere in Frequency Auction

By Jonathan Browning - Jan 12, 2012 3:15 PM GMT+0700

U.K. regulator Ofcom said it will no longer reserve mobile-phone frequencies for Deutsche Telekom AG (DTE) and France Telecom SA (FTE)’s joint venture Everything Everywhere in an auction that may raise as much 2.6 billion pounds ($4 billion).

The regulator will probably only reserve spectrum needed for high-speed wireless Internet for Hutchison Whampoa Ltd. (13)’s Three or a new company to keep four operators in the U.K., Ofcom said today in a statement with revised proposals.

The delayed auction, now scheduled for the end of 2012, will sell frequencies equivalent to three-quarters of the spectrum currently being used by operators. Carriers need the bandwidth to cope with surging data demand as users watch films and surf the Web on smartphones including Apple Inc. (AAPL)’s iPhone and handsets using Google Inc.’s Android system.

“This is a crucial step in preparing for the most significant spectrum release in the U.K. for many years,” Ofcom Chief Executive Officer Ed Richards said. “The proposals published today will influence the provision of services to consumers for the next decade and beyond.”

Ofcom altered its proposals after initially saying it planned to reserve spectrum for Everything Everywhere, the U.K.’s largest operator.

Valuable Low Frequencies

All the companies are seeking access to the valuable 800 megahertz band of low-frequency spectrum that can travel long distances with fewer expensive base stations. Vodafone Group Plc (VOD), based in Newbury, England, and Spain’s Telefonica SA (TEF) are the only operators in the U.K. to hold low-frequency airwaves. The regulator also increased the amount of spectrum that Three needs to buy.

The number of U.K. operators fell to four from five after France Telecom and Deutsche Telekom merged their British units to form Everything Everywhere, an operator bigger than Telefonica’s O2 unit and Vodafone in the country. The market may consolidate further without intervention from the regulator, Three had said.

The auction has been delayed for more than two years as the regulator faced legal challenges. Vodafone and O2 previously opposed restrictions on the amount of low-frequency spectrum that they could bid for.

To contact the editor responsible for this story: Jonathan Browning at jbrowning9@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net