Ofcom announces that Vodafone Group plc (LON:VOD) and BT Group plc (LON:BT.A) are among the winners of the 4G mobile spectrum auction.
This morning brought news from Ofcom that Vodafone (LSE: VOD) (NASDAQ: VOD.US) and BT Group (LSE: BT-A) (NYSE: BT.US) have won contracts to deliver superfast mobile broadband services, known as 4G, in the UK.
After more than 50 rounds of bidding, five companies won the spectrum auction comprising a total of 250MHz, auctioned in two separate bands - 800MHz and 2.6GHz; the other three were Everything Everywhere, Hutchison 3G UK and Telefónica UK. The spectrum licences are all indefinite in length, and there will be no further licence fees for at least 20 years.
Services are expected to begin rolling out within six months, while Ofcom believes that "almost the whole UK population will be able to receive 4G mobile services by the end of 2017 at the latest".
Paying and gaining the most, for the total sum of £790m Vodafone has acquired the spectrum of 2 x 10MHz in the 800MHz band and 2 x 20MHz in the 2.6GHz band, plus an additional 25MHz of unpaired spectrum in the 2.6GHz band. UK chief executive Guy Laurence commented:
"We've secured the low frequency mobile phone spectrum that will support the launch of our ultra-fast 4G service later this year. It will enable us to deliver services where people really want it, especially indoors. This is great news for our customers. The next generation of mobile internet services will bring real benefits to both consumers and businesses."
BT has secured a licence for 2 x 15MHz of FDD and 20MHz of TDD 2.6GHz spectrum, won at a price of £186m. Chief executive Ian Livingston said:
"We are pleased to have secured this spectrum. We have said that we do not intend to build a national mobile network. Instead, this spectrum will complement our existing strategy of delivering a range of services using fixed and wireless broadband. We want our customers to enjoy the best possible connections wherever they are and this spectrum, together with our investment in fibre broadband, will help us achieve that."
4G capability will provide Vodafone and BT's business and consumer customers with an enhanced range of mobile broadband services, and will develop the next generation of mobile internet services using long-term evolution (LTE) technology. Research measuring 4G speeds will be conducted at the end of 2013.
Elsewhere, Everything Everywhere paid £589m for 2 x 5MHz of 800MHz and 2 x 35MHz of 2.6GHz, Telefónica UK paid £550m for 2 x 10MHz of 800MHz, while Hutchison 3G UK paid £225m for 2 x 5MHz of 800MHz. MLL Telecom and HKT Company were unsuccessful bidders. All proceeds from the auction will go to HM Government.
BT's shares rose 1.2%, 3.24p, to reach a five-year high of 280.14p in early trade, while Vodafone's dropped 0.2% to 163.20p -- although this is likely a continued knock-on effect from many analysts' downgrades in recent days following speculation that it is considering an expensive takeover of Kabel Deutschland.
BT trades on a forecast yield of 3.4%, while Vodafone currently offers a 5.8% income. However, with well-respected City analyst Neil Woodford selling his entire holding of Vodafone from the Invesco Perpetual High Income fund that he manages, are shares in this sector reliable to hold for the long term?
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> Sam owns shares in Vodafone but no other company mentioned. The Motley Fool has recommended shares in Vodafone.
