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Austrian spectrum auction comes under fire

auction11Industry experts have attacked the recent Austrian LTE spectrum auction process, arguing that the outcome took too much money out of the market and threatens competition in the Austrian mobile sector. That incumbent Telekom Austria was able to acquire half of all the spectrum made available could be particularly detrimental.

TA announced Monday that it had won four blocks of 800MHz spectrum, three blocks at 900MHz and seven at 1800MHz, giving it a 2 x 140MHz allocation in total for a price of €1.03bn. But second placed T-Mobile took only 2 x 45MHz and 3 Austria just 2 x 25MHz. The auction raised more than €2bn overall, a good deal more than the Austrian government had set as an acceptable minimum—€526m.

Bengt Norström of Swedish consultancy Northstream said the result was an illustration of “the insanity of auctions”, favouring the player with the strongest legacy business and greatest capacity for investment. The Austrian regulator’s original intention to bring in a new player could never have been met, he said, suggesting that the high price might prove a barrier to network investment.

Meanwhile Stefan Zehle, CEO of Coleago Consulting, which specializes in spectrum policy, said that demand for 1800MHz spectrum in Europe means that “governments can hold a gun to operators’ heads and demand almost any price.” Telekom Austria now holds 53.8 per cent of the sub-1GHz spectrum in the market, despite having a market share of less than 40 per cent, he said.

He also suggested that Hutchison’s 3 had been victim to inconsistencies in Austrian spectrum policy. The third placed operator faced constraints on its investment due to having the weakest cashflow, he said.

“The design of the Austrian auction and the absence of effective caps on sub 1GHz spectrum holdings suggest that the Austrian government is not particularly concerned about the effects of spectrum concentration on competition. On the other hand, the spectrum divesture conditions imposed on Hutchison to clear its acquisition of One Austria [Orange], suggests a very different view of spectrum concentration is applied when it comes to approving in-market consolidation.”

Nordström concurred, saying: “It’s important to make sure that the operators are on a level playing field in terms of access to lower and higher bands. Nothing has been done to safeguard the continued existence of competition.”

While Telekom Austria said that it had acquired “unique strategic advantages” as a result of the auction, 3 Austria’s CEO Jan Trionow described it as a “disaster for the industry.”

Telecoms.com

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