Spectrum licensing preparations in the UK

The problem

Licences for use of 800MHz and 2.6GHz spectrum were being awarded in the UK. Our client, a leading mobile operator, wished to understand how much spectrum in each band it required and how much it was likely to have to pay to win it. Our client also wished to develop a strategy to acquire its targeted spectrum.

The solution

The initial objective of our work was to provide spectrum valuations for our client and its main competitors, but our role evolved to provide much broader assistance to our client. In particular, this involved providing detailed assistance with responses to two rounds of consultation by Ofcom and then providing 'war room' auction support to our client for the duration of the auction itself. We also provided assistance on the valuation of 1800MHz spectrum that one of the UK operators, Everything Everywhere (EE), was required to divest as a condition of the merger that created it.

We supported our client with the development of an overall spectrum strategy, establishing its demand for spectrum in the available bands. We firstly considered demand for the spectrum by considering our client's spectrum holdings and its requirements for additional spectrum for delivery of increased coverage, capacity and new services, with a focus on LTE roll-out.

We then used this demand assessment to calculate valuations for the available spectrum and to provide advice on the incremental value of different spectrum lots. We then reviewed Ofcom's consultation proposals and, based on the identified spectrum needs of our client, assisted with development of consultation responses.

In parallel to the main auction process, EE was required to divest a proportion (2×15MHz) of its 1800MHz spectrum. We helped our client to analyse in detail how much this spectrum was likely to be worth to it and to its competitors in order to inform potential negotiations with EE.

Finally, we helped to develop a bid strategy for the main auction for our client, in conjunction with our client's internal bid team and its auction advisors, by considering the proposed auction format – the combinatorial clock auction (CCA) format – and the available spectrum lots. We provided on-site support throughout the auction and helped our client to analyse the round-by-round bidding and to forecast which operators were likely to win what spectrum, and at what price.

The result

We were able to provide our client with detailed analysis of the technical, commercial and strategic value of the available spectrum to its business, taking account of the demand for mobile broadband services and roll-out of LTE services.

Our work resulted in our client winning a package of spectrum with which it was happy at a price which it was willing to pay. The result for our client has also been perceived by the markets to be a positive one.

The team

The team used its extensive experience of spectrum valuation and bid strategy for mobile operators to provide a spectrum strategy for our client to meet its long-term mobile spectrum needs as legacy services are migrated to LTE.

The team also called on its extensive knowledge of 3G and 4G mobile market and spectrum valuation approaches to define a range of scenarios and outcomes for the client.