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UK 4G Auction Raises Less-Than-Expected ₤2.3 Billion

Chancellor George Osborne remained disappointed today following the UK 4G auction which raised only ₤2.3 billion for the government, a third less than what the Treasury counted on to keep its borrowing in check.

The sum raised is but a fraction of the ₤22.5 billion mobile phone operators paid in 2000 for acquiring 3G spectrum licenses. However, telecoms watchdog Ofcom believes 4G could deliver a ₤20 billion boost to the UK economy over the next ten years. “This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country,” said the Ofcom chief executive, Ed Richards. “We are confident the UK will be among the most competitive markets in the world for 4G services.”

Everything Everywhere, Vodafone (LON:VOD), Three, O2 and BT Group (LON:BT.A) are the five out of the seven bidders who will be using spectrum for fourth generation wireless internet services, intended to meet demand for faster connections on mobile devices and deliver speeds comparable to the average fixed-line broadband services. BT Group does not plan to launch a mobile phone network but will use its spectrum for 4G connections at fixed locations.

**Vodafone Places Largest Bid**
Vodafone Group will pay ₤790.8 million for their 4G spectrum, the most out of the five auction winners, followed by EE contributing ₤588.9 million and O2’s bid of ₤550 million. Three and BT Group will pay ₤225 million and ₤186.5 million respectively.
Vodafone’s share price fell by 0.18 percent to ₤1.632 at 10.50 GMT in London trading, while BT Group saw its stock climb by 1.58 percent to ₤2.8130.

The two losing bidders in the auction were Hong Kong Telecom owner PCCW and private-equity backed Buckinghamshire-based firm MLL, which supports fixed and wireless services in the UK.
**EE Loses Customers Despite 4G Network**
Despite having a head start with its 4G network, this week EE, previously known as Everything Everywhere, revealed it lost more customers than it gained in the fourth quarter. The company, which simultaneously runs T-Mobile, Orange and EE, added 201,000 customers on lucrative mobile contracts but lost 239,000 customers on pay-as-you-go deals. Annual revenues dropped by 1.9 percent to ₤6.6 billion and pre-tax losses widened to ₤249 million from ₤113 million last year. EE didn’t reveal how many of its 201,000 new contract subscribers have signed up for the more expensive 4G network, saying it didn’t want to influence the Ofcom auction.

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The Telegraph reports that the quarterly results disappointed analysts, who had expected EE to make substantial advances against its competitors as Britain’s sole 4G provider. “Experience suggests that phrases like ‘solid early momentum’ cover all manner of sins.” commented Steven Hartley, principal analyst at Ovum. “It is what the results don’t say that seems most telling.”
**Vodafone’s share price as of 20.02.2013, 12.30 GMT, was ₤1.6280.**
**BT Group’s share price as of 20.02.2013, 12.30 GMT, was ₤2.8030.**

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