Mobile Operators Face Higher Spectrum Fees Despite Coverage Pledges

Ofcom has lowered proposed increases to the annual licence fees paid by EE, O2, Three and Vodafone for the use of 900 MHz and 1800MHz spectrum, to take into account recent coverage pledges. But all four still face a significant increase in yearly payments.

Currently, the mobile operators pay a combined £64.4m a year for the bandwidth, but the government has ordered Ofcom to revise these charges to reflect the spectrum’s true market value.

The first proposed increases were published in early 2014 but were revised in August following complaints from operators that higher licence fees would reduce the amount they could spend on the rollout of their respective 4G infrastructure.

Spectrum licence increase

The August proposals would have seen total fees increase to £246.7m, but these have been adjusted to take into account a legally-binding commitment by all four UK networks to provide a basic mobile service to 90 percent of the UK’s geographic area by 2017.

Ofcom’s latest proposals would see Vodafone and O2 both pay £61.2m a year, EE £75.6m and Three £25.2m – a total of £223.3m. The proposed increases take into account the amount each company paid for 4G spectrum in February 2013 as well as similar auctions around the world.

“In Ofcom’s view the ‘market value’ required under the Government Direction should reflect the value to an operator not holding the spectrum at present, as opposed to the value to the operator that currently holds the spectrum – in a similar way that the price paid by the winning bidder in an auction is typically set by how much the next highest bidder was willing to pay,” said the regulator.

Ofcom’s consultation will remain open until 17 April and a final decision is expected later this year.

“While we fully support government’s work to get more coverage to more parts of UK, we’re disappointed to see that Ofcom’s current proposal fails to recognise the obvious costs associated with doing this, and note this could risk future network investment if not properly addressed,” said an EE spokesperson. “We’ll examine the consultation more closely and respond in due course.”

TechWeekEurope understands O2, Three and Vodafone are reviewing the consultation document before making any further comment.

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