Ofcom consults on licence fees for mobile spectrum

01 August 2014

Ofcom has today published a further consultation on revising annual licence fees for the 900 MHz and 1800 MHz spectrum bands used by mobile network operators.

The Government directed Ofcom in 2010 to revise fees to reflect full market value, after the completion of the 4G auction. The two bands are used for 2G and 3G, including voice calls, and some 4G services.

Today's proposals build on earlier analysis, following consideration of responses from stakeholders. Taken together, the changes to the analysis decrease the overall proposed levels of fees, although some of the individual numbers that make up the fees have risen.

Mobile network operators currently pay an annual combined total of £24.8m per year for 900 MHz spectrum and £39.7m for 1800 MHz spectrum.

Philip Marnick, Group Director of Ofcom's Spectrum Group, said: "We expected substantial responses to our initial proposals, which are based on complex analysis. We've listened carefully to the arguments and evidence put forward during the consultation, which has helped refine our proposals.

"We're conducting a further consultation to ensure we reach an appropriate view about the best approach to setting the annual licence fees. We expect to publish our final decision on mobile licence fees around the turn of the year."

Updated calculations for new licence payments

After carefully reviewing stakeholders' responses, Ofcom has updated its analysis of:

  • the bids made in the 4G auction for 800 MHz and 2.6 GHz spectrum;
  • the interpretation of international benchmarks; and
  • the calculation used to convert the total value of the spectrum into an annual fee, over 20 years.

This has produced revised proposed total fees payable by mobile network operators of £109.3m per year for 900 MHz spectrum and £137.5m for 1800 MHz spectrum (at March 2013 prices).

Current and proposed total annual licence fees for 900 MHz and 1800 MHz spectrum

 

Vodafone

Telefónica

EE*

H3G*

Current

£15.6m

£15.6m

£24.9m

£8.3m

Proposed in October 2013

£83.1m

£83.1m

£107.1m

£35.7m

Revised proposals**

£65.8m

£65.8m

£86.4m

£28.8m

* EE and H3G figures relate to holdings after EE's divestment of 1800 MHz spectrum to H3G, to be completed in October 2015.
** These revised proposals use the Consumer Price Index as the inflation index to calculate annual licence fees, whereas the figures proposed in October 2013 used the Retail Price Index. Ofcom consulted in April 2014 on changing the inflation index. 

Subject to this consultation, new annual licence fees are likely to come into effect in 2015. The consultation closes on 26 September 2014.

ENDS

NOTES FOR EDITORS

  1. The Government's Direction was made on 20 December 2010.
  2. Ofcom's 4G auction was completed in February 2013. Everything Everywhere Ltd, Hutchison 3G UK Ltd, Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc), Telef�nica UK Ltd and Vodafone Ltd all won spectrum.