Market Insight

Poland looks to enhance competition with 4G spectrum

August 22, 2013

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The Polish regulatory body (UKE) announced the terms of its 4G auction. Applicants are expected to submit their bids prior to the deadline on October 1st.

Up for grabs are 5 blocks of 2x5 MHz paired spectrum in the 800 MHz band, and 7 blocks of 2x10 MHz paired spectrum in the 2.6 GHz band. The asking prices are  PLN 250 million  (about €59m) for 2x5 MHz of the 800 MHz band and 50 million PLN (about €5.9m) for 2x10 MHz of the 2.6 GHz.

Operators will be limited to a maximum of 2 blocks and 3 blocks of the 800 MHz and 2.6 GHz band respectively. In addition, operators with existing licenses in the 800 and 900 MHz bands will be limited to a total of 40 MHz in those two bands.

Successful applicants will have 12 months and 36 months to launch their networks in the 800 MHz band and 2.6 GHz bands respectively. In addition, licenses in the 800 MHz band will come with yearly a commitment to cover 90% of selected municipalities chosen by the regulating body. The number of municipalities will grow for the first three years, from 1242 initially, to 2253 after two years, and 2386 finally. In addition, by the end of the third year 97% of the country and 62% of the population must be covered.

All licenses will be valid for 15 years from the allocation of the frequencies.

This is UKE's second 4G auction in 2013, offering spectrum in the low frequency 800 MHz band and the high capacity 2.6 GHz band. Previously, UKE held an auction for the 1800 MHz spectrum from which Play received 2x15 MHz and T-Mobile received 2x10 MHz.

The 40 MHz limit introduced by the Polish regulator for the long-range 800 MHz and 900 MHz spectrum is designed to promote competition.

Play and Orange had agreed to jointly deploy 4G via a wholesale model, depending on the terms of the auction. They currently hold a total of 23.6 MHz (10 MHz and 13.6 MHz respectively) of 900 MHz band, which would limit their joint venture from acquiring more than a single block of the 800 MHz spectrum. Given the limitations, it is unlikely that they will pursue this option.

It is also unlikely that Orange and T-Mobile, who have a 15 year network sharing agreement since 2011, would choose to bid as NetWorkS!(their 50:50 joint-venture). Doing so, would make them unqualified to bid for any 800 MHz spectrum with an existing joint 900 MHz spectrum holding of 31.6 MHz. 

This problem is not an issue for the subsidiaries of Solorz-Zak's group should they be consolidated. Polkomtel is the only one with spectrum in the 900 MHz band and both Aero2 and Mobyland operate in the 1800 MHz band. Instead, each subsidiary could theoretically choose to bid separately and secure all five blocks in the 800 MHz band.

The reserve prices of PLN 250 million for 2x5 MHz of the 800 MHz band and PLN 50 million for 2x10 MHz of the 2.6 GHz band work out to about €0.15/MHz/person and €0.015/MHz/person respectively. While that appears over three times cheaper than the prices of the UK 4G auction, these are just the reserve prices. With auction limits designed to discourage joint-bidding and with six existing mobile spectrum holders interested in bidding, the prices are likely to increase.

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