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German 4G auction winds up

€4.4bn in the coffers, incumbents on the airwaves

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The month-long German radio spectrum mega-auction has finally wound up, with the existing operators snapping up all the available bandwidth and contributing €4.4bn to the German economy.

The auction has been running for 27 working days, with 224 rounds of bidding as the four bidders vied for different combinations of frequencies including the Digital Dividend spectrum released by the switching off of analogue TV, smaller chunks around 2GHz, and the anachronistically named 3G-expansion spectrum at 2.6GHz.

The final tally comes to €4.4bn. Only four bidders were approved by the regulator: Vodafone, T-Mobile (Telekom D), Telefonica (To2 GER) and E-Plus, with the first three getting a pretty even split and E-Plus picking up the remains.

E-Plus didn't get any of the digital dividend band, which has excellent propagation properties and thus cost more than any other band by a considerable margin. T-Mobile, Vodafone and Telefonica paid around €1.2bn each for a couple of paired 5MHz channels (totalling 20MHz per operator). That's just about enough to run a national network, which is good considering that the band comes with an obligation to roll out some sort of service to 90 per cent of Germans by 2016.

What kind of service isn't clear - the auctions are technology-neutral despite the pairing of bands being well suited to frequency divided protocols such as LTE*. Internet access over LTE is what the operators are expected to deploy, but there's no obligation there.

Higher up the dial T-Mobile snapped up 30MHz of spectrum around 1.8GHz, which is the same band as the operator's 60MHz UK holding currently used to carry 2G GSM services. E-Plus spent €40m on a couple of paired 5GHz channels at 1.8GHz.

E-Plus also spent almost €200m on marginally less spectrum at 2GHz, with Vodafone and Telefonica grabbing one paired channel each at the same band.

Telefonica bought up all the unpaired spectrum around 2GHz, perhaps pointing to some sort of WiMAX or TDD-LTE deployment, though the company could equally well be planning to use the €10m-worth of spectrum for backhaul. €5.7m of that money went on the 15MHz-wide band that Ofcom, in the UK, is uncharacteristically planning to hand over to wireless cameras for free.

Telefonica also bought some unpaired spectrum at 2.6GHz, but less than half of Vodafone's grab, as the full results show. Those results also show that the Germans raised €344m on their 2.6GHz spectrum, which is reassuring as the spectrum has been poorly valued elsewhere.

The whole band was sold for €3.8m in Finland, and the paired spectrum at 2.6GHz, for which the Germans paid €257m, was only worth €2.7m in the Netherlands. The Finnish result fits for a county with only a 16th of Germany's population, but the Netherlands has a fifth of the population and one might expect the spectrum to be of commensurate value.

But raw spectrum is far from the only issue in such auctions, which are dependent on the competitive landscape and the value that operators believe they can extract from customers. In Germany Vodafone tops that list, handing over more than €1.4bn compared to E-Plus's purchases which total only €284m.

It will be a year or two before we see just what the network operators plan to do with their radio spectrum, but the success of the auction will be a welcome relief to Ofcom who is planning something very similar for the UK's airwaves next year. ®

* Long Term Evolution - the 4G standard preferred by just about everyone except Intel.

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