Monday, 30 May 2016
More on the sale of L-Band Spectrum by Qualcomm
Back in August, Qualcomm had been looking to sell its 1452-1492MHz spectrum – and it seems it's finally found two willing buyers in the form of Vodafone and Three.
It's thought the two networks paid over £100m in total for the spectrum. The chip company rather lucked out, having only paid £8.3m at auction in 2008.
At the time it looked as if one of the natural routes for the company was to roll out its MediaFLO, the mobile TV broadcast system, a rival to DVB-H.
However, as both mobile TV standards proved to be dismal failures Qualcomm didn’t actually have an application for the substantial chunk of spectrum. It’s only part of the 4G specification as a supplementary download frequency, and while it is nice and close to single channel frequencies it’s not paired so would only be useful for uplink or downlink, and it’s hugely unlikely that any shipping mobile or tablet devices would have any antennae able to support it – even if the frequency was baked right into the chipset.
The bandwidth, however, is very useful for backhaul, and with the increasingly important trend from voice to data usage the need to support the higher throughput requirements of carrier aggregation having an option to link sites by radio is a very valuable asset plus an extremely useful option in the infrastructure toolkit. It is believed that EE and O2 also bid for the spectrum but EE would have been on a sticky wicket given that once its merger with with BT is complete, it will have 30 per cent of the available spectrum, and especially worrying if it had bought the full 40MHz space from Qualcomm since that would have taken its holding to 35 per cent.
The other networks are already calling for some re-farming. Before the networks can actually use the spectrum they will need Ofcom approval for the purchase. The regulator claimed “at that point we have not received a spectrum trading application from Qualcomm”. Approval came swiftly however, as this sale was expected and the frequencies were recently moved from being seen as part of general spectrum trading to mobile trading in anticipation.
Then Vodafone and Three applied and there was a ten-day window to back up the application, and then there was another ten days for Ofcom to decide if it should rubber stamp the deal or consult.
However, as there was a previous consultation over moving L-Band into the Mobile Spectrum Trading Regulations most of the arguments were already established and did not need to be revised or consultants voices heard, so that was in fact unlikely.
One factor which did have an affect on the value of the sale is AIP, as this is the amount Ofcom charges for administering the spectrum. With the mobile phone carriers' frequencies this is included in a larger sum called ALF (Annual Licence Fees). The job of ALF is for the UK Government to squeeze as much money out of the operators as possible “reflecting the true value of the spectrum”. When that spectrum was worth only £8.3m the ALF would be very different to the sum of over £100m that Vodafone and Three are believed to have paid. The current AIP agreement with Ofcom still has a number of years to run but when it expires Ofcom will no doubt look to secure a far higher rate based on the sale price. Ironically the more the purchasers paid for the frequencies the more they will cost to own in the long run and the less they are worth.
Hence the legal beagles and multitudes of financial consultants must have had a field day with much fun and frolic with that one.
Even for the multi-billion-pound fat and happy mobile telcos this is a significant transaction, and in time the amounts only need to show up in the accounts of two of the three companies involved for the full financial picture to one day soon, emerge.