Broadcast Bidding

Wireless Hype Falls to Earth

Vielbrunn, Hessen, Deutschland, Alte Stromleitungen über Feldern
Rural areas will benefit from the new spectrum.
  • Why it matters

    Why it matters

    The lower amount paid for new spectrum in Germany reflects a mature market with stagnating subscriber growth and lower revenues.

  • Facts

    Facts

    • Three operators paid €5.1 billion for additional spectrum in Germany’s most recent auction.
    • The 2000 auction raised nearly €51 billion.
    • The number of operators in Germany has shrunk from six to three.
  • Audio

    Audio

  • Pdf

Germany on Friday said it raised €5.1 billion, or $5.8 billion, in an auction of coveted low-frequency spectrum, only a tenth of what it amassed 15 years ago at a time when the wireless industry, and its hype, was in its heyday.

This time around, Germany’s three big mobile operators – Deutsche Telekom, Vodafone and Telefonica – bid cautiously for airwaves to broaden coverage to rural areas and satisfy demand for streaming video and other data-hungry devices.

The operators bought a range of frequencies for high-speed wireless broadband services that the industry has dubbed as 4G. The service is already available in Germany but the auction will provide new capacity to the network.

The German government is pushing broadband communications, both wireless and wireline, especially in less populated areas.

“Around €1.3 billion of the auction proceeds should flow into a government fund subsidizing fixed broadband projects in rural areas,” Wolfgang Specht, an analyst Bankhaus Lampe, wrote in an e-mail to Handelsblatt Global Edition. “The government is likely to add another €1.1 billion. The biggest profiteer should be Deutsche Telekom, followed by Vodafone.”

The meager bounty – only a tenth of the €51 billion Germany raised in an auction of 3G licenses in 2000 – highlighted the reduced profitability and prospects of an industry that has long become competitive and crowded.

Statistically, there are now more mobile devices in Germany and Europe than residents, and the vast numbers of operators and resellers of mobile service, combined with regulatory caps, have made the business less profitable.

The reduced expectations of mobile phone operators is a marked contrast to the turn of the millennium, when the bidding on new 3G licenses was unrestrained, leading to cash windfalls for governments in Germany, Britain and other European countries.

Since then, operators and the financial analysts who follow the industry have tracked its increasing maturity, and decreasing profitability.

Analysts had expected the current auction, which ended last Friday after 181 rounds of bidding over 16 days, to raise between €4 billion and €5 billion.

Vodafone was the highest bidder with €2.1 billion, followed by Deutsche Telekom with €1.8 billion and Telefonica Deutschland with €1.2 billion.

That amount, however, is a far cry from the money raised at the height of the dot.com boom in 2000 in the bidding for the 3G licenses called UMTS, the Universal Mobile Telecommunications System. It was the highest ever achieved in a European auction, followed by the United Kingdom’s UMTS auction, which raised €38.3 billion.

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