UK mobile operators pay close to £1.4bn for 5G spectrum

Ofcom auction beats expectations as EE, Vodafone, O2 and Three splash out to secure bandwidth for superfast mobile broadband

The UK’s biggest mobile operators have smashed expectations by spending almost £1.4bn in the race to secure spectrum to launch next-generation 5G services.

BT-owned EE, Vodafone, O2 and Three have paid close to double what many City analysts had expected Ofcom’s auction to raise, as the mobile operators seek to open up a world of internet-connected world of driverless cars, smart home appliances, delivery drones and superfast video on the go.

City analysts had a wide range of predictions on what the auction would net the government – spanning £630m to £1bn – with the attractiveness of 5G services to consumers and mobile operators proving much more valuable.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

“Mobile network operators are willing to dig deep to acquire 5G spectrum – evidently seeing it as a strategic necessity,” said Dhananjay Mirchandani, a telecoms analyst at Bernstein.

The big four operators have secured broadly the same amount of 5G spectrum to use after the auction.

Vodafone won 50MHz of spectrum in the 3.4GHz frequency band auctioned paying £378m, BT-owned EE won 40Mhz paying £303m, Telefónica-owned O2 picked up 40MHz for £318m, and Hutchison-owned Three spent £151m on 20Mhz. Three UK had already secured a 40Mhz of 5G spectrum prior to the auction.

5G is set to be rolled out in the UK in the next decade and the mass connectivity it allows will help expand the so-called internet of things (IoT), in which appliances and devices wirelessly connect to the internet and each other.

IoT technology is being used in everything from smart homes to wearables and 5G could be used to enable driverless cars to communicate with each other and other road users, as well as develop “smart manufacturing” – connecting all the various machines involved in a production chain – and the drone delivery networks that companies such as Amazon would like to develop.

“This is good news for everyone who uses their mobile phone to access the internet,” said Philip Marnick, spectrum group director at Ofcom. “As a nation we’re using ever more mobile data on smartphones and mobile devices. Releasing these airwaves will make it quicker and easier to get online on the move. It will also allow companies to prepare for 5G mobile, paving the way for a range of smart, connected devices.”

Ofcom’s auction also saw O2 win 40MHz of 4G spectrum (2.3Ghz) that was made available paying £206m. The win was considered essential by analysts as O2 had the smallest share of the UK’s usable mobile spectrum.

Parent company Telefónica’s plans for a £10bn stock market flotation of O2 have been hampered over the last two years because of Brexit vote and market uncertainty.

“The outcome for O2 UK is of particular importance given the potential IPO of this business after the auction,” said Mirchandani. “O2 went into the auction with the smallest spectrum portfolio. Expect news flow on an IPO in the near future, possibly in the summer.”

While significantly beating expectations the £1.4bn 5G auction is a far cry from the £22.5bn raised for 3G spectrum two decades ago. The expectation had been for £5bn. Winning bidders subsequently found themselves making multibillion-pound writedowns after revenues and profits failed to match prices paid.

Memories of overpaying hampered the auction of 4G spectrum in 2013 which raised £2.3bn about £1.2bn less than the Treasury had forecast – prompting an investigation from the National Audit Office into what went wrong.


Mark Sweney

The GuardianTramp

Related Content

Article image
What is 5G and when can I get it in the UK?
All you need to know about the next generation mobile phone network

Samuel Gibbs

25, May, 2019 @6:00 AM

Article image
Sky moves into UK mobile-phone market after deal with O2 owner
Agreement with Telefónica comes a month after rival BT announced it was to buy EE

Chris Johnston

29, Jan, 2015 @2:10 PM

Article image
EE and Vodafone drop Huawei phones from 5G network launch
EE is to be first next-generation mobile network in UK, going live in six cities on 30 May

Mark Sweney and Samuel Gibbs

22, May, 2019 @6:09 PM

Article image
Sky to pre-register customers before it launches mobile service
Sky Mobile, due to launch before end of year, is expected to focus on attracting company’s existing 12m subscribers

Mark Sweney

20, Oct, 2016 @12:24 PM

Article image
Roaming charges return: how will the dreaded charge affect UK travellers?
If Brexit and Covid wasn’t enough, the extra cost of using a mobile in the EU is making a comeback

Miles Brignall

21, Aug, 2021 @8:00 AM

Article image
Government delays decision on whether to restrict Huawei
Chinese tech firm’s equipment will continue to be used in UK’s 5G mobile networks for now

Mark Sweney

22, Jul, 2019 @7:05 PM

Article image
Smartphone swipe payment scheme unveiled

Weve, formed by Britain's three largest mobile operators, has joined up with Mastercard to build a payments system that links bank cards to SIM cards

Juliette Garside

06, Feb, 2014 @6:02 AM

Article image
Mobile users face long wait for Ofcom to help with compensation for loss of signal
The telecoms regulator’s probe into the industry is only a consultation. Proposals, decisions – and cheques – will not arrive quickly

Anna Tims

29, Feb, 2016 @7:00 AM

Article image
Mobile networks hand small fortune to shareholders – but little to taxpayers
Communications giants EE, Vodafone and O2 generate billions in revenue but still benefit from multiple tax breaks

Juliette Garside and Ian Griffiths

31, Jul, 2013 @8:45 PM

Article image
Mobile phone firms agree £5bn deal with government to improve coverage
Sajid Javid secures deal with EE, O2, Three and Vodafone to ensure 90% of UK landmass has basic coverage by 2017

Nicholas Watt

18, Dec, 2014 @12:01 AM