German Spectrum Auction Bidding Hits $2.2B

Bidding in Germany's multi-band spectrum auction has risen to more than €2 billion (US$2.18 billion), easily surpassing the minimum fee of €1.5 billion ($1.63 billion) set by German regulatory authorities.

Deutsche Telekom AG (NYSE: DT), Vodafone Germany and Telefónica Deutschland GmbH are all competing for a slice of the 700MHz airwaves they will need to support mobile broadband services in the future.

Also up for grabs are licenses in the 900MHz and 1800MHz bands as well as 40MHz of unpaired 1.5GHz spectrum.

The sale began on May 27 and bids totaled just less than €2.02 billion ($2.2 billion) in round 37 of the auction on June 1.

Germany is the first country in Europe to conduct an auction of 700MHz airwaves, which have until now been used by the broadcasting sector. (See 700MHz: Coming soon to Germany.)

Regulators elsewhere in the region are also planning to release 700MHz frequencies into the telecom sector and will be watching the outcome of the German process keenly.

The sale is likely to attract particular interest from stakeholders in France, where a 700MHz auction is scheduled to get under way later this year.

Germany's regulator is also licensing airwaves that are already used in the telecom market.

All three German operators currently hold 900MHz and 1800MHz concessions, but a number of these are due to expire at the end of next year.

Of all the frequencies on sale, the 900MHz airwaves appear to have generated the most interest so far, with bids for spectrum in this band totaling nearly €715.6 million ($779.65 million) in round 37.

In the 700MHz band, where a similar amount of spectrum is up for sale, bidding had reached just €450 million ($490.28 million) in round 37.

One reason for that may be the strict conditions attached to the 700MHz licenses, requiring recipients to cover 98% of the population with high-speed mobile broadband services.

Moreover, broadcasters will need to switch to an alternative transmission technology before operators can make full use of the 700MHz airwaves, and this could take several years to implement.

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At the same time, operators are keen to safeguard their 900MHz and 1800MHz holdings.

All 2x35MHz of spectrum in the 900MHz band is under the hammer as well as two thirds of the 2x75MHz in the 1800MHz range.

Following its merger with E-Plus Service GmbH & Co. KG , Telefónica is currently the dominant 1800MHz player, controlling 2x44.8MHz of spectrum in this band, according to recent data from the European Communications Office.

Germany Spectrum Holdings (MHz)
Source: European Communications Office
Source: European Communications Office

As much as 2x34.8MHz of this is due to expire next year, however, and Telefónica was bidding for only 2x20MHz in round 37 of the auction.

Both Deutsche Telekom and Vodafone are looking to improve their 1800MHz positions at Telefónica's expense.

Just 2x5MHz of Deutsche Telekom's 1800MHz spectrum is due to expire next year, but the incumbent was bidding for 2x15MHz in round 37.

Vodafone was looking to pick up as much as 2x30MHz in round 37 -- it currently holds as little as 2x5.4MHz in the 1800MHz band and its license is one of those up for renewal in 2016.

Spectrum in the 1800MHz band can be used in a variety of circumstances and to support old-fashioned voice as well as newer data technologies.

The lower-band airwaves, meanwhile, are prized for their ability to carry signals over long distances and provide high-quality coverage inside buildings.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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