Government hopes for 4G airwaves windfall boosted by successful auctions abroad

Demand could see UK auction raise more than £2 billion

Hopes that next year's sale of 4G airwaves could generate a windfall for the Government have been fuelled by successful auctions in other countries.

Mobile operators in the Netherlands paid a total €3.8 billion (£3.1 billion) for the country's 4G spectrum on Friday, easily surpassing expectations of around €450 million (£366 million). In Ireland last month, operators overcame a challenging economy to generate €854 million (£700 million).

Brian Potterill, PwC's director of telecoms strategy, now expects the UK's 4G auction will raise the high-end of his previous £2 billion to £4 billion estimate.

Despite many operators finding it increasingly difficult to boost returns from mobile data, he said demand for capacity was showing no sign of relenting.

Shares in Vodafone, which bought €1.4 billion (£1.1 billion) worth of the Dutch spectrum, were down 2% on concerns it could spend more than expected when it comes to the UK's turn to sell mobile frequencies.

Telecoms regulator Ofcom has placed a reserve price of £1.3 billion on the 4G sale but the Government's tax and spending watchdog this month estimated a £3.5 billion boost to the public finances.

Industry analysts at Ovum have cautioned against speculating on how much the UK could raise through the 4G sale.

Its regulation analyst Matthew Howett said: "Trying to guess how much money a spectrum auction can raise is a bit of a fool's game.

"It depends on bidding strategies and you don't know how people will behave when they go into an auction.

"We were all taken by surprise when the Government came out with the £3.5 billion value. If they wanted to include any value it should probably have been the reserve price Ofcom has set of £1.3 billion."

Ofcom reportedly received at least five applications by its 11 December deadline to take part in its sale.

Existing players EE, Vodafone, O2 and 3 are expected to have paid a £100,000 deposit for the chance to pick up frequencies in the 800MHz and 2.6GHz bands. BT has previously expressed interest in acquiring 2.6GHz frequencies to bolster its wi-fi offering, although it is not thought to have aspirations of becoming a major mobile player.

It is thought that international and private equity firms could also have registered to take part.

Ofcom may announce the names of those allowed to bid in the competition as early as this week.

PA

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