TIME March 2012

LTE Spectrum and Network Strategies

Strategic Options for Mobile Operators in Dynamic 4G Mobile Markets

LTE Spectrum and Network Strategies

LTE Spectrum and Network Strategies

The LTE spectrum auctions across Europe are the start of LTE becoming market reality. Operators are focusing on one of two spectrum strategic options: major investments into 800 MHz or smart hybrid multiband solutions with >1GHz spectrum on 1800, 2600 FDD and TDD bands.

These options are linked to their network deployment strategies and are increasingly implemented via network cooperation agreements. By choosing smart spectrum and network deployment strategies, operators can improve their position in dynamic 4G markets.

Spectrum auctions in Europe indicate LTE will quickly have a significant impact on market dynamics

In reaction to the explosion in mobile data traffic and to improve access in rural areas, the European Union ensured that the Digital Dividend, 800 MHz spectrum previously used by analogue terrestrial TV, would be used for mobile data networks. Most countries are auctioning off new 2600 MHz spectrum at the same time, and also enable operators to refarm 900 and 1800 MHz bands for usage via UMTS/HSPA or LTE. The availability of this new spectrum is creating a range of opportunities for incumbent and challenger operators alike to improve their competitive market position.

Arthur D. Little has identified auction patterns and a variety of smart network deployment strategies. In this Viewpoint, we will review the lessons learned and assess possible auction and network deployment strategic options for mobile operators in 4G markets.

Auction results indicate operators highly value 800 MHz spectrum, but alternative auction and spectrum strategies have also emerged

LTE auctions have already been completed in Germany, France, Spain, Portugal, Italy, Sweden, the Netherlands, Belgium, and Switzerland. Competition for the 800 MHz spectrum has dominated auction results, especially in markets in which four mobile operators compete for three licenses of 10 MHz each on the 800 MHz band. While prices for 800 MHz skyrocketed in Germany, Italy and France bidders in other countries managed to keep the auction fee rather low.

In Germany, e-plus chose not to acquire 800 MHz spectrum due to the demanding obligations to cover remote areas, as well as the high price. Deutsche Telekom, Vodafone and Telefónica Germany (O2) paid €1.2 billion for 10 MHz paired 800 MHz spectrum each. €3.6 billion of the total auction proceeds of €4.4 billion was paid for just the 800 MHz band – which means that 82 percent of the auction proceeds were paid for just 60 MHz (18 percent) of the 335 MHz of auctioned spectrum.

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