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Italy Wraps Up Sale of 700MHz Spectrum for 5G, Raises €2B

Iain Morris
9/14/2018
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Italy has wrapped up the paired 700MHz part of its multi-band 5G auction after raising slightly more than €2 billion ($2.3 billion) for the licenses, which were bought by existing operators Telecom Italia, Vodafone and Iliad.

Overall bidding levels hit more than €2.8 billion ($3.3 billion) on Thursday, exceeding an initial government target of about €2.5 billion ($2.9 billion), as operators continued to bid for spectrum in other frequency bands, including the 3.6-3.8GHz and 26.5-27.5GHz ranges. (See Italian Operators Bid €2.5B in 5G Spectrum Auction.)

Operators are bidding for the licenses that will support next-generation 5G technology, which will provide extra capacity for congested mobile networks and, it is hoped, lead to new service opportunities in the years ahead.

While Italy is not the first country in Europe to hold a 5G auction, its sale is the first to include spectrum across low, mid-level and high frequency bands. (See Spanish 5G Auction Nets €438M for Govt and UK's £1.4B '5G' Auction Looks Bad for Industry.)

The sub-GHz frequencies, which have tended to attract the highest valuations in previous auctions, provide much better in-building and wide area coverage, while very high frequencies are needed for the fastest connections. Mid-band spectrum between 3.4GHz and 3.8GHz is seen as a compromise and become most associated with 5G technology in the European region.

In its latest update on the auction process, Italy's Ministry of Economic Development said competition for the 3.6-3.8GHZ spectrum appeared to be "lively."

That is a encouraging sign for government authorities that regard 5G auctions as an opportunity to fill the public coffers, but an alarming one for Europe's telcos. Some of Italy's operators had previously threatened to boycott the latest auction in protest at what they saw to be high base prices and unfavorable conditions.

With operators desperate to acquire new spectrum, any such threats may have rung hollow, although incumbent Telecom Italia (TIM) has indicated it may have to sell non-core assets to pay for investments in 5G technology. (See Telecom Italia Says 5G Auction May Force It to Sell Assets.)

In its own recent statement on the 700MHz sale, Telecom Italia said it had paid €680.2 million ($796 million) for paired 10MHz allocation (meaning 10MHz for the uplink and another 10MHz for the downlink). That 15-year license, however, will not become available until 2022.

On the plus side, this means Telecom Italia will not have to cough up the proceeds immediately. Italy's government expects to collect around €1.25 billion ($1.46 billion) from all operators in the current fiscal year, says Telecom Italia, with most of those revenues coming from the other spectrum bands.


For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.


Earlier this week, authorities noted that Iliad (Euronext: ILD) had stumped up about €676.5 million ($792 million) for a 700MHz license that was reserved for the company, as Italy's newest operator. Iliad's concession is also for a paired 10MHz allocation.

That implies Vodafone Italy spent about €683.2 million ($800 million) for the remaining paired 10MHz slot.

In the other spectrum bands, Telecom Italia, Vodafone and Iliad appear to face competition from Wind Tre, an operator formed from the merger of 3 Italia and Wind Telecomunicazioni SpA that previously sold assets to Iliad, and Swisscom's Fastweb SpA (Milan: FWB) subsidiary.

Overall 700MHz spending works out at roughly €0.56 ($0.66) per MHz per capita (or MHz pop), a metric commonly used to assess the value of spectrum. That is even more than the €0.51 ($0.60) that a host of European operators paid for 800MHz spectrum during the 4G auctions that occurred several years ago, according to market research firm Analysys Mason.

However, in typical 5G auctions of mid-band spectrum and very high frequencies, spending has been much lower so far. Light Reading previously examined five countries that claim to have held 5G auctions in these bands -- Ireland, Latvia, South Korea, Spain and the UK -- and found that in none did spectrum in a single band raise more than $0.20 per MHz pop. (See The Great 5G Spectrum Devaluation.)

— Iain Morris, International Editor, Light Reading

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CTO15229
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CTO15229,
User Rank: Light Beer
9/24/2018 | 1:06:05 PM
Italy's 700 MHz spectrum Auction
Iain,

Thank you for the timely and interesting article, you've provided some great insights for an American looking to understand spectrum valuation trends in Europe.

However, I have difficulty accounting for the numbers in this article. According to the article the sum of Telecom Italia's 700 MHz spectrum, Iliad's 

Telecom Italia   €0.6802 billion
Iliad                 €0.6765  "
Vodafone Italy  €0.6832  "
TOTAL calc. :   €2.0399 billion

But the article gives the total as €2.86 not 2.4 billion.  Why the discrepancy?

I appreciated reading that the total amounts to €0.56/MHz•POP but I calculate €2.86 billion/59.4 million people/60 MHz as €0.80/MHz•POP.  I would appreciate the clarification, if possible.  I realize that net and gross numbers might differ, and with delayed payments perhaps there is a NPV calculation involved but I would appreciate any clarification you can provide.  Thank you. Steve 
iainmorris
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iainmorris,
User Rank: Blogger
9/24/2018 | 2:19:48 PM
Re: Italy's 700 MHz spectrum Auction
Thanks for your comments and interest in the article. The discrepancy stems from the bidding for other airwaves up for sale. Telecom Italia, Vodafone and Iliad have agreed to pay more than €2 billion for the 700MHz spectrum, but the auction includes some other frequencies, too -- principally airwaves in the 3.6-3.8GHz band. That part of the sale is still running and means that overall bidding is now up to more than €4.4 billion. There is an update on Light Reading about this today: http://www.lightreading.com/mobile/spectrum/italy-5g-auction-bids-top--euro-44b-in-worrying-sign-for-telcos/d/d-id/746301?

The overall price per MHz pop will be somewhat lower than €0.56 because of the other spectrum included in the sale. We should get the full picture when bidding for those other bands has finished.

I hope this helps.
CTO15229
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CTO15229,
User Rank: Light Beer
9/26/2018 | 12:29:15 AM
Re: Italy's 700 MHz spectrum Auction
Iain, 

Thank you, your comments do help. 

It would be most helpful to have a reference to the source documents, presumably from the Italian government's AGCOM press release or auction database.  

 

Thank you again for your reporting on the auction of these frequency bands.


Steve Wilkus
alexblogsite
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alexblogsite,
User Rank: Light Beer
10/17/2018 | 12:00:14 AM
Re: auction of different spectrum
It seems sensible to have a great big auction of a bunch of different spectrum, given the imminence of 5G in the wild. Iliad has been guaranteed a nice lot of 700 MHz, which will help a lot with coverage, but it might want to have another bid for that bigger block of 3.7 GHz if it want to be a significant 5G player.
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