Telco giant BT (BT.A) is in the firing line again after bosses of several telco rivals banded together to call for watchdog Ofcom to cap mobile network capacity ownership. According to a report in the Financial Times chief executives of TalkTalk (TALK), CityFibre (CITY:AIM), PCCW-owned Relish and the Federation of Communications Services have signed a letter asking for a 30% cap, a limit already exceeded by BT with its ownership of the EE network.

This follows a similar demand from 3 UK CEO Dave Dyson, who in September renewed calls for Ofcom to rebalance the distribution of mobile spectrum, enforcing an ownership cap as part of the upcoming 2.3 GHz to 3.4 GHz spectrum auction. A 30% limit would also severely restrict Vodafone's (VOD) activity in the latest spectrum auction.

UK mobile spectrum ownership today

  • BT/EE – 42%

  • Vodafone – 29%

  • 3 UK – 15%

  • O2 – 14%

Rivals claim that capping spectrum ownership would prevent BT and Vodafone stockpiling network capacity and allow smaller operators greater freedom to compete, good for consumers, say the claims. BT and Vodafone counter that rivals have had plenty of opportunity in the past to invest in UK mobile networks, and have failed to do so leaving them short.

The GHz spectrum auction was due to take place this year but was delayed by the proposed merger of 3 UK and 02, a deal that was ultimately blocked by regulators. The issue is now in the hands of Ofcom which plans to publish a consultation in the autumn, which will set out plans for the 2.3 GHz to 3.4 GHz spectrum.

aaabt-to-launch-a-4g-mobile-network

But it is important for investors to understand that not all network spectrum is created equally. Here's what you're not being told.

Different frequency bands have different characteristics. Low-frequency spectrum, like the 800 Mhz band, for example, is carries less data, but it's great over wide areas and penetrating through walls.

High-frequency spectrum, the 2.6 GHz band, say, is much better for carrying huge amounts of data but works best over smaller areas, on a local high street or in a shopping centre. To use it across larger areas requires more mobile masts to ping signals across.

Communication towers.

The spectrum that is being sold off in the UK next year is high-frequency, which means it can carry more data, great for 4G networks that can provide superfast internet access and stream videos etc, currently what most consumers want.

Yet much of the legacy spectrum currently owned by the big mobile operators is low-frequency sold-off during previous auctions, the last in 2013. So simply comparing the ownership metrics of mobile network providers does not necessarily give clear insight into the competitive landscape.


Issue Date: 04 Oct 2016