Ofcom delays mobile spectrum auction

Mobile companies need more spectrum for 4G services

Ofcom is to delay the start of its auction for another chunk of 4G spectrum, after threats of legal action from Telefonica and Hutchison, parent companies of O2 and Three.

They want Ofcom to wait until a decision is made about their plan to merge the two mobile companies.

BT and EE are also planning to merge.

The spectrum, formerly used by the Ministry of Defence, would provide 4G services for mobile companies.

The Competition and Markets Authority (CMA) has provisionally approved the proposed merger between BT and EE.

But the European Commission has announced its decision to launch an in-depth investigation into the proposed merger between O2 and Three.

And Ofcom has previously cast doubt on this merger winning regulatory approval.

In a statement on Thursday, Ofcom said it had received letters from Telefonica and Hutchison stating their intention to bring legal action against the regulator over its decision to begin the auction before the outcome of the European Commission's findings.

"After careful consideration, given these specific circumstances, we have decided for reasons of good public administration to delay commencing the auction process," it said.

Capacity issues

Legal action also held up the previous 4G auction - as mobile companies disagreed about how spectrum should be distributed.

Ofcom had been due to start accepting applications for the spectrum this month, with plans for the auction to take place in February or March.

Now, it looks unlikely to begin before the summer - with the European Commission's judgement on the O2-Three merge expected in May.

The spectrum on offer could add capacity to 4G networks, but it is considerably smaller than the previous chunk of 4G spectrum.

It has a reserve price of £70m, compared with £1.3bn for the previous portion of the airwaves.

Matthew Howett, an analyst with research company Ovum, said: While Ofcom doesn't have spectacular form when it comes to awarding spectrum on time, in this instance it probably makes sense to delay things.

"Should the merger between Three and O2 be approved, then remedies around spectrum holdings will almost certainly take time to work out and any future spectrum award would need to be reconsidered accordingly.

"However, if the... merger is blocked, then the spectrum award can go ahead fairly quickly without change."

Mr Howett said the impact on consumers would be minimal.

"Despite demand for mobile data growing, all mobile operators are fairly well served by their current spectrum holdings and will be for the short to medium term, so while a delay is unfortunate, it shouldn't be too problematic," he said.