IHS Global Insight Perspective | |
Significance | The result of the auctions now means that more than half of the licences issued for the spectrum have been issued to new entrants. |
Implications | The entry of the two new players into the mobile market has been engineered by the government—and will now hopefully lead to improved network quality and better deals for consumers. |
Outlook | The spectrum allocation and resulting 4G networks will improve network quality and data speeds, ushering in a new era of mobile services and applications. |
The Dutch government has announced the winners in the 2.6 GHz spectrum auction, with newcomers Ziggo 4 and Tele2 Mobile winning licences, alongside the existing mobile operators KPN, T-Mobile Netherlands and Vodafone Netherlands. The Dutch ministry of Economic Affairs announced that Ziggo 4, a joint venture between local cable operator Ziggo and Liberty Global's pan-European broadband operator UPC, and Swedish operator Tele2 had successfully bid for 40 MHz each, or four blocks of the 190 MHz spectrum band available.
Meanwhile, of the three existing mobile operators, incumbent KPN and U.K. giant Vodafone successfully bid for 20 MHz each, or two blocks, while Deutsche Telekom's T-Mobile acquired one block of 10 MHz. The Dutch government had limited these operators to bidding on a maximum of 55 MHz of spectrum each, in order to encourage new entrants.
The price of the spectrum blocks has not yet been set, as the government will now hold an additional auction for specific sections of the bandwidth, after which proceeds from the auction will be disclosed.
Outlook and Implications
- The Dutch Mobile Market Opens Up: The entry of the two new players into the Dutch mobile market is no surprise, and has been somewhat engineered by the government who limited the spectrum the existing operators could bid for. Incumbent KPN and Vodafone Netherlands mounted a legal challenge to these restrictions (see Netherlands: 25 March 2010: KPN Issues Court Challenge to Dutch 2.6-GHz Licence Proposals), but a Rotterdam court ruled last week that the auction would proceed as planned. The result of the auctions now means that more than half of the licences issued for the spectrum, which is ideal for the launch of 4G next-generation networks for super-high speed mobile broadband services such as LTE, have been issued to new entrants—something which will hopefully lead to improved network quality and better deals for consumers.
- Realistic Pricing Improves Competition: While the successful bids have not yet been disclosed, they are expected to be around 50 million euro (US$67 billion), a far cry from the almost 3 billion euro paid by the big three operators for their 3G spectrum ten years ago. While this more realistic pricing has allowed new entrants to participate, it will also benefit the existing operators who are still suffering the effects of the global economic slowdown. KPN has recently announced its fourth-quarter earnings rose 3.4% year-on-year (y/y) due to some aggressive cost cutting throughout 2009 (see Netherlands: 26 January 2010: KPN's Q4 Earnings Up 3.4% as Cost-Cutting Takes Effect), but the former incumbent is looking to make more adjustments to increase its competitiveness in an increasingly aggressive Dutch broadband market. Meanwhile, new entrant Tele2 has recently been boosted by a strong performance in its home Nordic mobile operations, but its key successes have been in its exploding Russian markets (see Europe: 21 April 2010: Tele2 More than Doubles Q1 Net Profit on Continued Russian Success). Indeed, the Dutch acquisition marks something of a change from its recent strategy of exiting stagnant Western European markets in favour of expansion Eastwards.
- European Next-Generation Spectrum Licensing Underway: As operators across Europe are clamouring for more spectrum to handle the explosion in data traffic fuelled by improving mobile broadband speeds and smartphone use, it is hoped the new frequencies will alleviate pressure on operators. The government in neighbouring Germany is also auctioning mobile phone frequencies this month (see Germany: 12 April 2010: Europe's First 4G Frequencies Auction Begins in Germany), while Denmark, Austria, Sweden and France are likely to follow later this year. The United Kingdom is expected to allocate its own 4G frequencies next year, while Spain, Italy and Portugal have yet to say when their auctions will take place. The spectrum allocation and resulting 4G networks will allow the operators to improve network quality and data speeds, ushering in a new era of mobile services and applications.