4G auction raises USD5bn for Dutch coffers

17 Dec 2012

The sale of mobile spectrum suitable for fourth-generation (4G) Long Term Evolution (LTE) services in the Netherlands has raised EUR3.8 billion (USD5 billion) for government coffers, significantly more than the EUR480 million estimate. Indeed, the figure was so high that the country’s leading player by subscribers, KPN Telecom, has said it will be cutting its dividend in order to be able to pay for its licences. KPN’s mobile arm along with the other two incumbents – Vodafone Netherlands and T-Mobile Netherlands – each won spectrum, as did new market entrant Tele2 of Sweden. Domestic cable operators Ziggo and UPC, which both have a strong presence in the broadband market had planned to bid jointly, but pulled out when the bidding price went too high.

In the wake of its spectrum awards, KPN announced it will no longer be paying a final dividend for FY2012, and will pay only EUR0.03 per share in FY2013 – well below its already revised dividend estimates of EUR0.35 in 2012 (down from EUR0.90) and ‘at least’ EUR0.35 in 2013. Eelco Blok, the chief executive of KPN – which is 28% owned by Mexican telecoms tycoon Carlos Slim via America Movil (AM) – said that whilst his firm was paying a ‘considerable’ premium for the licences, as the market leader it could not afford to miss out on the auction. He added that despite the high price, he expected to make good on the investment over the course of the licences 17-year term. KPN plans to roll out its 4G service from February 2013. In a statement the firm said that it will start to roll out 4G in the northern part of the ‘Randstad’, followed by the southern part of the Randstad. By mid-2013, 4G services will be available for approximately 50% of the Dutch population. In the second half of 2013, 4G will be rolled out further. Its 4G network will be available throughout the Netherlands in the summer of 2014. KPN has been offering 4G to business customers in parts of The Hague and Utrecht since the summer of 2012. These customers are very positive about 4G, it said.

The Dutch regulatory authorities OPTA and Agentschap Telecom reserved spectrum for new entrants at the 31 October auction in a bid to boost consumer choice and reduce prices for end users. The tender for 41 individual spectrum licences is the biggest held in the Netherlands to date, and saw Tele2 – which is already present in the Dutch market as a mobile virtual network operator (MVNO) – acquire a full licence allowing it to build out its own network, Agentschap said in a statement. Some of the spectrum licences will kick off in 2013 and most will run for 17 years.

KPN paid EUR1.351 billion for its licences, Vodafone Netherlands paid EUR1.380 billion for its licences, while Deutsche Telekom’s T-Mobile unit spent EUR911 million. Tele2 bid of EUR161 million and secured licences in the 800MHz, 2600MHz and 2600MHz bands. The full list of licence allocations is as follows:

KPN Mobile The Netherlands: 2×10MHz (paired) in the 800MHz band; 2×10MHz (paired), 900MHz band; 2×20MHz (paired), 1800MHz band; 1×5MHz (unpaired), 1900MHz band; 2×19.8MHz (paired), 2100MHz band; 1×30MHz (unpaired), 2600MHz band; and 2×10MHz (paired), 2600MHz band.

• Tele2 NL: 2×10MHz (paired) in the 800MHz band; 1×5MHz (unpaired), 2600MHz band; and 2×20MHz (paired), 2600MHz band.

• T-Mobile Netherlands: 2×15MHz (paired), 900MHz band; 2×30MHz (paired), 1800MHz band; 1×24.6MHz (unpaired), 1900MHz band; 2×20MHz (paired), 2100MHz band; 1×25MHz (unpaired), 2600MHz band; and 2×5MHz (paired), 2600MHz band.

• Vodafone Netherlands: 2×10MHz (paired) in the 800MHz band; 2×10MHz (paired), 900MHz band; 2×20MHz (paired), 1800MHz band; 1×5.4MHz (unpaired), 1900MHz band; 2×19.6MHz (paired), 2100MHz band; and 2×10MHz (paired), 2600MHz band.

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