Ofcom sets new annual licence fees for mobile spectrum

24 September 2015

Ofcom has today published revised annual fees for mobile operators, determining the amount of money they must pay to use certain parts of mobile spectrum.

The Government directed Ofcom in 2010 to revise these fees to reflect full market value. ^(-1-)

The fees are paid annually by mobile network operators for the 900 MHz and 1800 MHz spectrum bands, which they use to provide voice and data services using a mix of 2G, 3G and 4G technologies.

Following extensive analysis and consultation, Ofcom has concluded that mobile operators should pay a combined annual total of £80.3m for the 900 MHz band, and £119.3m for the 1800 MHz band. ^(-2-)

Total fees payable by operators will now be £199.6m per year, which is 13% lower than Ofcom’s earlier proposals in February. Operators have also paid the fees at different points in the year but will in future pay on a single common payment date set by Ofcom.

The new fees come into effect in two phases: one half of the fees increase, from the current to the new rates, will come into effect on 31 October 2015.

The second half will come into effect on 31 October 2016, with full fees payable annually from that point. ^(-3-)

Ofcom has conducted a series of detailed consultations on the level of the fees. This complex analysis considered a number of factors. These included the sums paid in the 4G auction and the amounts bid in overseas spectrum auctions.

Ofcom’s final assessment also takes into account stakeholder feedback and relevant considerations such as mobile operators’ requirement to provide voice coverage across 90% of the UK landmass, which Ofcom concluded did not have a material effect on the market value. The fees set also take into account the outcome of the spectrum auction in Germany, which concluded in June this year. ^(-4-)

Philip Marnick, Ofcom’s Group Director of Spectrum, said: “We have listened carefully to the arguments and evidence put forward by industry, and conducted a complex and comprehensive analysis to determine the new fees.

“The mobile industry has not previously had to pay market value for access to this spectrum, which is a valuable and finite resource, and the new fees reflect that value.”

Revised Fees

Compared to the levels proposed by Ofcom in February:

• the final fees for the 1800 MHz band are 3% lower, reflecting a reduction in the ‘discount rate’ used to convert a ‘lump-sum value’ (of the type paid by licensees when they acquire a licence in an auction) into an equivalent annual payment. This reduction reflects the most recent debt rates; and
• the final fees for the 900 MHz band are 24% lower, reflecting the discount rate reduction and the prices paid in the German auction.

Current and revised annual licence fees for 900 MHz and 1800 MHz spectrum

*EE and H3G figures relate to holdings after EE’s divestment of 1800 MHz spectrum to H3G, to be completed in October 2015.