Vodafone CEO warns Europe not to be speedy with 5G auctions

4 Oct 2018

Vodafone warns of hasty auctions as 5G race speeds up. Image: afaizal/Depositphotos

New CEO of Vodafone not happy after stumping up €2.4bn for Italian government.

Vodafone’s new chief executive, Nick Read, has warned governments not to jump on the bandwagon of exploiting 5G spectrum auctions.

His feelings became clear after Italy’s 5G auction set a record price for 5G spectrum, with €6.5bn generated over the course of a 14-day auction from four telecoms firms.

‘It is critical that European governments avoid artificial auction constructs which fail to strike a healthy balance for the industry’

For its share of Italian 5G wireless spectrum, Vodafone had to hand over a cheque worth €2.4bn to the Italian government. Vodafone and Telecom Italia secured the most spectrum, paying €2.4bn and €2.5bn respectively, with Wind Tre (Hutchison) paying €517m and Eir owner Xavier Niel’s Iliad paying €1.2bn.

This contrasts with Ireland’s 5G spectrum auctions, where five firms bid €78m between them for the first slices of 3.6GHz spectrum. The sum was a far cry from the €450m instant windfall – with overall fees adding to up to €854.6m – for the Irish exchequer when the 4G licences were awarded in 2012. At the time, the Irish Government was under pressure from the troika to bring in more revenue, any revenue, to keep the country afloat.

The €6.5bn windfall for Italy for its 5G spectrum bears an uncanny resemblance to the 3G spectrum auctions of 2002, which saw telecoms firms across Europe pay nations €160bn between them for licences for a technology that at the time was still only half-baked. As the tech downturn raged and the telecoms industry went into its own particular nosedive, many telcos asked the EU for their money back but were curtly refused.

Short-term thinking?

Read, who took over from predecessor Vittorio Colao, did not mince his words and hit out at the short-term thinking of the Italian government.

By contrast, mobile operators competing for a share of the Italian 5G spectrum paid eight times more per megahertz for spectrum than they had in Spain this year and 10 times more than in Finland this week. Looming 5G auctions in Europe include Germany, Romania, Hungary and the Czech Republic.

According to the Financial Times, Read warned: “Auctions should be designed to balance fiscal requirements with the need for investment to enable economic development. It is critical that European governments avoid artificial auction constructs which fail to strike a healthy balance for the industry.”

Read has a point. The Italian 5G auctions set a very dangerous precedent if opportunist telecoms regulators follow suit and hark back to the 3G auctions of 2002.

Just like 3G technology back then, 5G is still a largely untested platform, which, while it promises speeds of up to 1Gbps and beyond, requires a higher density of base stations in order to make these speeds possible.

If anything, the money spent on 5G should be going into researching and testing technologies for the betterment of society, such as using spectrum for essential medical, security and environmental services – not for lining the coffers of cash-strapped governments that sniff an opportunity.

Vodafone McLaren Mercedes. Image: afaizal/Depositphotos

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years