Thursday, July 29

The 5G auction starts with delay, discounts and the complaint of small operators before Competition

As if from investors who yearn for the last flamenco painting of the 17th century discovered, Telefónica, Orange and Vodafone will participate from this Tuesday in a long-awaited auction. Although in this case it is not a coveted painting, nor will it be held at Christie’s or Sotheby’s. It will be the radioelectric spectrum in which a large part of the 5G offer in the coming years will be developed and the auction will be directed by the Ministry of Economic Affairs. But the resulting figure will be millionaire. The starting price of the ‘works’: 995 million.

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Finally, this July 20, the 5G auction begins in Spain, which has already been held in other European countries and which arrives with a delay and some controversy. In the operation, the Government seeks to award the 700 MHz band that will serve as the basis for most of the services that this new connectivity technology will offer to the market, especially business, but also residential. Releasing this spectrum last year forced all households to retune DTT, which moved to other frequencies. In this case, a faster auction is expected than in other countries, such as Germany where it lasted for months, and the final result could be known this week.

The auction was originally going to take place last summer. It was the date set for a long time by the sector to bid on these frequency packages. But, as in everything, the pandemic forced the plans to be delayed. Nor did it arrive in the first quarter of the year, when the Government proposed the new date. It will be finally from this Tuesday when the auction of the seven packages that will be awarded for 20 years, extendable for another 20 years, is completed.

The date has not been the only one that has changed. Also the price. The Government initially announced that the starting price of the auction would be 1,170 million euros. This was stated in the public consultation that was carried out on the process. However, this price caused recurring complaints among the operators who considered that initial amount too high, since they understood that the final invoice would be more expensive. In the conversations that took place during that process, the Ministry ended up accepting a reduction of 15%, up to 995 million euros. There will be seven blocks that will go from 8.5 million to 350 million starting.

But although the price was lowered, finally only three companies in the sector have decided to participate in the auction. The big three. Telefónica, Orange and Vodafone. It should be remembered that 5G is already a service that is marketed in the market, since two other minor auctions have previously been held. One was held in 2018 and another, last December. Thanks to this sale, different companies have been launching 5G services for customers with compatible devices in recent months.

MoreMóvil will not bid. The company of the KKR, Cinven and Providence funds has established itself in the fourth position in the sector and will strengthen it in the coming weeks when it takes the fifth position, Euskaltel. The group launched a bid for 2,000 million for the Basque company, with a strong presence also in Galicia and Asturias. But it won’t be in this auction. The group understands that it already has enough spectrum – it participated in the 2018 one – to serve its clients and also considered that the high starting price of the current bids did not pay off.

Those that will participate, the big three telecos, assume different commitments when participating in the auctions. They have an obligation for 5G to reach some 150 of the largest towns in Spain. Also certain strategic infrastructures, such as the main airports in the country, ports or highways. In other words, it is not yet important in this phase that 5G reaches the entire territory but rather the main towns and infrastructures, from which its implementation will be developed.

However, this situation, accompanied by other requirements of the process, has raised criticism from small operators, focused on the local and regional market. These companies, gathered at the Aotec employer association, have filed a complaint with the National Markets and Competition Commission against the specifications of the 5G auction in Spain. The association justified the claim in which “serious discrimination” was taking place, both territorially due to “the limited territory in which coverage is required”; as for the competition, which receives “a hard blow” since they understand that it leaves out companies in rural areas that will not have guarantees of access to mobile connectivity.

These companies understand that the auction benefits the large operators, as the obligations to offer services for other operators have been restricted. “The big operators during the last twenty years have abandoned the small municipalities in terms of telecommunications to their fate,” say the small operators, pointing out that it is they who have led to the arrival of fiber optics in less populated areas.

Complaints from the big telecos

The operators that do participate in the 5G auction do not even reach the bids in the best of their moments. The three large companies in the sector have suffered during the last three years, since the first auction, increasing pressure from small operators, who have ‘stolen’ hundreds of thousands of customers through a major price war in which they do not they have had no choice but to end up participating with their second and third brands.

In the sector, it is estimated that in order to implement 5G in Spain, investments of around 5 billion euros will be necessary. This situation has given rise to the big telecos to face common – not only in Spain, also at European level – against the competition rules. These companies understand that small operators have been encouraged to emerge that compete on price and erode their income base, while it is the large ones that must undertake investments in infrastructure, as is now the case in the case of 5G. For this reason, they have repeatedly requested financial aid and tax rebates for participating in its development.

The Government has placed 5G as one of its flags within the plan to digitize the economy. The Ministry has estimated the investment required to implement 5G in the country at 2,000 million euros. To finance this amount, the Executive has planned to dedicate 1,500 million euros from the European aid plan. “5G technology is expected to have a great impact on the economy and on job creation since it will allow the development of applications that will change the way in which products and services are produced, distributed and consumed,” the government told announce the date for the auction.

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