INTERVIEW: German Spectrum Bids Fell Short In Two Bands

Germany's mobile spectrum auction brought less to government coffers than expected primarily due to lower bids in two spectrum bands, according to telecom expert Hartmut Paulus, a partner at advisory firm KPMG.

The auction ended Thursday with total proceeds of EUR4.38 billion, well below Paulus' forecasts for EUR6 billion to EUR8 billion.

While bids for spectrum in the 800 megahertz band--seen as key for future high-speed networks--were in line, "the proceeds in other bands, especially the 2.6 GHz band and the 2.0 GHz band fell significantly short of what we've seen in other auctions, like in Scandinavia," Paulus told Dow Jones Newswires Friday. "This shows that there was sufficient spectrum for sale to serve all bidders for low prices."

The German auction was considered as a benchmark for other European countries, as it was the first time operators could secure spectrum for long-term evolution, or LTE, networks that will allow users to watch high-definition video and get much faster downloads on mobile devices.

Germany sold spectrum in the 800 MHz, 1.8 gigahertz, 2 GHz and 2.6 GHz bands. The 800 MHz band is the most valuable as it is the most cost-efficient way to build out next-generation mobile networks. The six blocks available at that frequency netted EUR3.6 billion, with successful bids for two blocks each from Deutsche Telekom AG (DT), Vodafone Group PLC (VOD) and Telefonica SA (TEF).

Dutch incumbent Royal KPN NV's (KPN.AE) German unit, E-Plus, failed to secure spectrum in the 800 MHz band.

"This isn't really surprising, but the company now has its options," Paulus said, adding that it still secured enough spectrum to stay in business.

Spectrum in the 2.6 GHz band will be used to build out fourth generation networks in urban areas, while the 1.8 GHz and 2.0 GHz bands will be used to expand existing networks.

KPN's relative weakness outside urban areas is good for the other remaining players, Commerzbank analyst Heike Pauls said in a note Friday, also adding that Deutsche Telekom's EUR1.3 billion bid for new spectrum was in line with her expectations.

Matthias Kurth, president of the German network regulator, Friday said he was satisfied with the proceeds of the auction.

-By Archibald Preuschat, Dow Jones Newswires; +49 211 13872 18; archibald.preuschat@dowjones.com

(Philipp Grontzki in Mainz, Germany contributed to this article.)

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