14 December 2018

The Swedish 700MHz auction concluded on 11th December, raising a total of SEK2.8 billion (EUR270 million) for 2×20MHz of paired spectrum. The final price is higher than expected, judging from previous European 700MHz auctions, and a closer look shows that the price is a function of supply and demand, as much as the underlying value of the spectrum.

After having been delayed in 2016, due to concerns over national security by the Swedish secret service and emergency services, the Swedish telecoms regulator Post- och Telestyrelsen (PTS) finally held the auction in December 2018. The auction concerned 2×20MHz of paired and 20MHz of unpaired SDL spectrum, the final prices are provided in Figure 1 below.

Figure 1: Outcome of Swedish 700MHz auction

1 Includes SEK300 m which are an obligation to invest in coverage in certain areas and will not be paid to the government.
2 Two lots of 2×5MHz.

Net4Mobility is a joint venture by Tele2 and Telenor Sweden. Hutchison owned Hi3G also bid in the auction but won no spectrum. The reserve price for both paired and unpaired was SEK10 million per MHz (equivalent to 0.10 EUR/MHz/pop).

Figure 2 below compares the resulting price per MHz pop with the prices in other European 700MHz auctions to date.

Figure 2: Prices per MHz pop for recent European paired 700MHz auctions3

3 Prices have been adjusted for inflation, duration (22 year equivalent, to mimic the Swedish award) and wealth (PPP).

In all previous auctions, the full 2×30MHz of spectrum in the paired 700MHz band was awarded. In Germany, Finland and Iceland, three operators were bidding for the spectrum. Three operators can share 2×30MHz equitably, resulting in the spectrum being sold for little more than reserve prices.

In France and Italy, there were four operators bidding. In Italy, this led to one operator, Wind, not acquiring any 700MHz spectrum, whereas in France, two operators (SFR, Bouygues Telecom) each acquired only 2×5MHz. In both these cases, this indicates excess demand, which has brought prices up beyond those of Germany, Finland and Iceland.

Sweden fits in the latter category. There were three bidders, however, only 2×20MHz of spectrum was made available, meaning that not all bidders could win 2×10MHz. Consequentially, Hi3G was outcompeted and won no spectrum but still contributed to pushing the final price to seven times the reserve price. The 2×10MHz which was not auctioned has been proposed to be used for PPDR (Public Protection and Disaster Relief) services.

All SDL spectrum on offer went unsold, indicating that even though the value of the paired spectrum was many times the reserve price, the value of the SDL spectrum was below the reserve price. The 700MHz SDL was auctioned before in the Italy 700MHz auction, but there too, the spectrum went unsold. At present, operators clearly see little use for the SDL due to the lack of handsets which can use the band.

In the end, the high auction price in Sweden was primarily a function of constrained supply. This highlights that there is an opportunity cost to reserving the spectrum for non-commercial use. Governments should therefore weigh up whether benefits of this exceed the economic value that could be generated by commercial mobile use of the spectrum.


Lee Sanders
Lee SandersPartner