Telefonica’s O2 Steps Up Push to Limit Rivals in U.K. Auction

Telefonica SA’s British unit is advancing a campaign to have regulators restrict the amount of spectrum rivals can buy in an upcoming auction that’s key for fourth- and fifth-generation wireless service.
It’s imperative that regulators intervene in the sale of frequencies this year to encourage a competitive marketplace that promotes investment in 5G, O2 Chief Executive Officer Mark Evans said in a phone interview. O2 is pushing for regulator Ofcom to restrict any one company’s share of spectrum to 35 percent, a move that would limit BT Group Plc and Vodafone Group Plc’s bidding, unless they make divestments.
“If we can get this right for 5G, then we can stimulate economic growth at a critical time for the U.K., which of course is going through a negotiation for Brexit,” Evans said.
Acquiring spectrum in the summer auction would boost O2’s attractiveness in any initial public offering or sale by Telefonica, as the unit currently lags behind BT and Vodafone in terms of usable spectrum. Telefonica had planned to use a 10.25 billion-pound ($12.8 billion) sale of O2 to pay down debt last year, but the deal was blocked by European regulators, and the company has since looked at an IPO.
O2 on Thursday released results of a study finding that 5G infrastructure will add 7 billion pounds annually to the U.K. economy by 2026, about six years after the expected start of deployment. That’s higher than the estimated economic impact of fiber broadband, according to research conducted by Development Economics.
Ofcom is reviewing submissions on its auction this summer of 40 megahertz of 2.3 gigahertz spectrum, which is usable now for 4G services, and 150 megahertz of 3.4 gigahertz spectrum, which will be key for 5G as early as 2018. O2 proposed a 35 percent cap on market share in a submission to Ofcom last month and Evans outlined the position in a subsequent interview with the Financial Times.
The regulator in November proposed to bar BT and its mobile unit EE from acquiring any new airwaves in the 2.3 gigahertz band, but let the companies bid for the 3.4 gigahertz range. BT has 45 percent of the U.K.’s immediately usable spectrum, while Vodafone has 28 percent, O2 has 15 percent and CK Hutchison Holdings Ltd.’s Three UK has 12 percent, according to Ofcom.

by Rebecca Penty, Bloomberg