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KPMG Warns on Spectrum Auction revenues

David Murphy

The final outcome of the UK 4G auction is far from certain, and the widely-quoted target figure of £3.5bn may not be achieved.

That’s the verdict of Milan Sallaba, head of Telecoms Strategy Advisory at KPMG. In an advisory note issued today, Sallaba said: “Each of the existing UK mobile network operators is under significant pressure to upgrade their networks to 4G, but most of them are having a tougher time making money from mobile data. Unless additional credible contenders emerge and join the bidding, the auction may bring in less than the £3.5bn expected by the government.

“In Germany, where the auction took place in 2010, the 4G spectrum went for less than £50 per capita. Applying the same metrics, this would suggest a total windfall in the region of £3bn for the UK government. However, the recent auction in Ireland raised much more money for the government than expected, perhaps underpinning hopes in the UK that bids could come in much higher than the reserve price set.

“Contenders’ bidding strategies, as well as the number of total bidders, will significantly influence the final outcome, but it is universally accepted that the final sum will be nowhere near the £22.5bn raised in the 3G auction in 2000, and will be more likely at the lower end of the expectations the government shared in the autumn budget.”

The 4G spectrum auction is scheduled to take place early in 2013. Interested parties have until 4pm (GMT) today to get their bids in - including a £100,000 deposit.