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Summary

On July 24, 2018, Spain's Ministry of Economy and Enterprise (MINECO) announced the results of the auction of 5G-suitable spectrum in the 3.6–3.8GHz band. The auction generated €437.6m ($512.4m) after four days of bidding.

200MHz of spectrum attracts bids more than four times the reserve price

MINECO has announced the results of its recent auction of spectrum in the 3.6–3.8GHz band. The 200MHz of spectrum has been divided into 40 5MHz blocks, each with a reserve price of €2.5m, and a 120MHz spectrum cap was also in place. The auction generated €437.6m ($512.4m) after four days of bidding. This far exceeds the €100m starting price established by the regulator. All concessions are valid for 20 years, with the license fees spread over this time.

All four mobile network operators (MNOs) – Telefonica, Orange, Vodafone, and Masmovil Group – registered to participate in the auction process. However, Masmovil went home empty handed. This is unlikely to be a problem, as the operator has already acquired a 40MHz block of spectrum in the 3.4–3.8GHz band from Eurona Wireless Telecom for €30m, and had previously acquired a 40MHz block of 3.4–3.6GHz spectrum via its €15.5m takeover of Neutra Network Services in June.

Vodafone was awarded 18 5MHz blocks for €198.1m, Orange was awarded 12 5MHz blocks for €132.1m, and Telefonica acquired 10 5MHz blocks for €107.4m. Orange has already disclosed plans to launch commercial 5G services in 2019, using the 3.5GHz spectrum, though this would likely use pre-commercial technology that will need to be updated at a software and equipment level at a later date. There has been a clear push by national regulators in Europe to release 5G-suitable spectrum since the European Commission (EC) announced its 5G Action Plan in 2016. Both the 3.4–3.6GHz and 3.6–3.8GHz bands have been identified by the EC as 5G pioneer bands in Europe because they are widely available in many countries, so it is unsurprising that Orange is keen to put its new holdings to use. However, rival Telefonica has said that it is unlikely to be ready to launch 5G services before 2020.

Similar auctions have already taken place in other EU countries, including the Czech Republic, Ireland, and the UK. Just as in Spain, the auctions there saw fierce bidding, which shows that operators are becoming very willing to invest in and plan for future resources. Ireland's auction achieved a $/MHz/pop value of 0.0556, while the Czech Republic achieved 0.0214. However, the UK's value is much higher than this, at 0.1520. By comparison, Spain's value is much closer to Ireland's, at 0.0506, which makes it far more affordable than the UK auction.

While it's good to see so much additional spectrum being allocated to operators in this auction, yet more will be required to ensure that operators have access to sufficient resources to deliver new services and meet growing consumer demand. Next, the Spanish government plans to auction spectrum in the 1.5GHz band as per its "Plan Nacional 5G," which should go some way to resolving this. However, the regulator continues to stall in allocating the 700MHz band, which several other member states have already auctioned. It is important that the country does not delay any further, as the EC is also pushing for a harmonized approached to this band. The regulator has consulted on the award of the 700MHz band, which is expected to be used by 2020, but a date for the auction has yet to be announced.

Appendix

Further reading

"Ofcom's much-anticipated 4G and 5G spectrum auction has exceeded price expectations," GLB005-000042 (April 2018)

"Czech Republic auction sees a surge in demand for 5G spectrum," TE0007-001171 (August 2017)

"3.6GHz spectrum auction in Ireland sees new entrant to the market," TE0007-001156 (May 2017)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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