Spectrum Strategy and Spectrum Auctions

Developing spectrum strategy is becoming increasingly complex as licensing, technology, traffic and competitive dynamics are creating as yet unprecedented situations for operators and regulators:

• Spectrum Refarming: Existing GSM spectrum licences can be refarmed to HSPA or possibly leapfrogging to LTE.
• Spectrum Redistribution: In the process of refarming regulators may seek to redistribute spectrum, particularly sub 1 GHz band spectrum.
• New Spectrum Auctions: New frequencies such as 2.5 GHz / 2.6 GHz and Digital Dividend 700 MHz / 800 MHz spectrum are being auctioned.
• Spectrum Trading: Spectrum trading is also being introduced in some markets.
• Spectrum Renewal: In many markets licences that were granted 15 years ago are coming to the end of their term and spectrum renewal is a hot topic.
• Introduction of LTE: Some operators already operate LTE in addition to GSM and UMTS (HSPA) in order to increase capacity in terms of bit/s per MHz.
• Multiple Technologies: The options for deploying technologies in different bands are increasing and timing of technology migration is affected not only by technology availability but also by the timing of licence renewal and refarming.
• Mobile Broadband Demand: The explosive growth in mobile broadband data creates demand for capacity that is far greater than the capacity required for voice.

Coleago has confronted all of these issues across a range of markets and are ideally placed to advise clients on their optimal spectrum strategy. Our advice ranges across a range of spectrum policy issues and our services cover initial lobbying strategy through spectrum valuation (including the modelling of mobile broadband demand and technology strategy) to the development of auction bid strategy.  We suggest you get in touch with Coleago well ahead of any auction since the complexity of the problem and large capex implications require comprehensive planning and buy-in at board level.

Please click on the chart below to enlarge.

In respect of a spectrum auction an operator has to find an answer to three fundamental questions:

• How much spectrum do we need in different bands? The question relates to an assessment of spectrum need in the context of the growth in demand, notably mobile broadband. This needs to take account of the overall strategy, for example traffic offload through WiFi or Femto cells.
• How much is each block worth, i.e. what is the most we should bid for it? This relates to valuing each spectrum block in order to set the bid limit for the auction. This is quite separate from auction strategy. Clearly, if there is no bid limit, the auction will be simple because a bidder would simply pay whatever it takes to win the spectrum. However, such an approach may not result in the creation of shareholder value.
• How do we obtain the spectrum as cheaply as possible? This relates to auction strategy. In any auction, the bid limits should be set before the start of the auction. The role of bid strategy is to ensure the spectrum is obtained for less than the bid limit and at the lowest possible price. Depending on the auction format there may be an opportunity to influence the outcome and avoid negative effects such as aggregation risk (e.g. be stranded with unwanted blocks). This is addressed by examining the auction rules and developing a bid strategy which will be tested through simulations and mock auctions.

If you would like to find out more about the major challenges and issues confronting telecoms companies and regulators please download the Spectrum Report from this page.

Main contacts:

Graham Friend
Managing Director
Tel: +41 79 855 1354
graham.friend@coleago.com

Scott McKenzie
Director
Tel: +44 7825 294 576
scott.mckenzie@coleago.com

Downloads

Spectrum Report Coleago.pdf