German operators blasted for ongoing spectrum battle

German operators criticised for ongoing spectrum battle

18 JUN 2015

Germany’s three major operators are “playing a losing game” by trying to outbid each other in the country’s ongoing spectrum auction, according to Coleago Consulting, as it approaches the €5 billion mark.

Deutsche Telekom, Vodafone Germany and Telefonica Germany commenced bidding for spectrum in the 700MHz, 900MHz, 1500MHz and 1800MHz bands in late May, and the auction began as expected, with all three operators settling for two blocks each in the 700MHz band.

Stefan Zehle, CEO at Coleago, told Mobile World Live that Vodafone Germany then “tried to change the status quo” in the 1800MHz band by trying to bid for five of the 10 available blocks, which led to a strong reaction from Deutsche Telekom, and in turn, drove up prices.

Bidding has since also resumed on 700MHz, as “the gap between 1800MHz and 700MHz grew so high, it was only a matter of time before one of them broke rank and pushed up prices even more”, said Zehle.

1800MHz spectrum remains popular with the operators because it provides much needed capacity and building penetration in cities. It also allows operators to keep their GSM networks running, which remains essential for voice traffic running on 2G and 3G networks.

“Bidding on 1800MHz completely changed this auction,” claimed Zehle. “Vodafone went in for five blocks, which wasn’t going to work as they would have had a clear advantage over the others. There needed to be an equilibrium but Vodafone’s bidding became excessive, which did not go down well with the other players.”

Zehle initially gave an estimate of €2.5 billion for auction, based on demand moderation, and the process was expected to be relatively straightforward after German regulator Bundesnetzagentur set a low reserve price for the three players, which are all well established in the German market.

“The regulator has always said the objective of this auction was not to raise money,” he said. “The reserve price was modest and the auction was supposed to work like a negotiation, which is why the regulator published information showing what each operator is bidding on, and at what price.”

Zehle revealed he spoke to a representative from Bundesnetzagentur this week at the European Spectrum conference in Brussels, who expressed his “surprise at the progression of the auction”.

He said: “Bundesnetzagentur was mostly interested in investment in the network, and maintaining competition for the socio-economic benefit of Germany,” he said. “The operators clearly haven’t taken this on board, and I don’t think anybody will be happy with the final outcome.”


Kavit Majithia

Kavit joined Mobile World Live in May 2015 as Content Editor. He started his journalism career at the Press Association before joining Euromoney’s graduate scheme in April 2010. Read More >>

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