Market Watch

Shake Up in UK Mobile Broadband Ahead of 4G Auction


Display Driver IC Forecast


The UK mobile broadband market is facing two potentially disruptive events before the 4G spectrum auction is scheduled to begin. The telecom's regulator Ofcom has announced that trading of mobile spectrum between operators will be allowed for the first time. Spectrum in the 900MHz, 1800MHz and 2.1GHz bands will be eligible to be traded.

Secondly, Hong Kong mobile operator PCCW is to build a high speed mobile broadband network in the UK through its subsidiary UK Broadband using 4G LTE technology. 4G services could be launched as early as 2012, which would make it the first available 4G service in the country. The company owns licences for spectrum in the 3.5GHz and 3.6GHz bands.

Analysis
The growth of mobile data is putting many operators' networks are under strain; IHS Screen Digest estimates that mobile data traffic in the UK will grow by nearly 700% between 2010 and 2015.

The green light given to spectrum trading has been roundly welcomed by mobile operators as a way to provide added flexibility to cope with the mobile data demand. Everything Everywhere are the most likely to first capitalise on this liberalisation. The newly formed joint venture of T-Mobile and Orange holds 2x60MHz of spectrum in the 1800MHz band currently being used for 2G services, far more than any other operator, but is required to divest 2x15MHz as a condition on the merger. Vodafone and O2 are the likely bidders, as both already hold 1800MHz spectrum.

IHS Screen Digest expects Everything Everywhere's divestment as being the only trade that will happen ahead of the spectrum auction. With a significant amount of spectrum available at the auction, operators are likely to adopt a wait and see approach as most are likely to obtain the spectrum they need in the auction anyway.

As UK Broadband is most likely going to enter the market as a wholesale provider, it may also have to wait until after the spectrum auction to find traction with mobile operators who suddenly find themselves short on spectrum. The company may have longer term problems selling to the mobile operators too. The spectrum held by UK Broadband is not in use for 4G LTE services anywhere else in the world, which will lead to higher device costs and issues with roaming. As signals in the 3.5GHz band are weak and very short ranged, the network is unlikely to extend beyond major population centres. Faced with these hurdles the company may opt to aim at other industries such as public safety or transportation.

Of the existing operators, Three is the most likely to strike an early deal with PCCW. This operator has very limited spectrum holdings, and has marketed itself as "a network designed for the mobile internet". As the smallest operator in the UK, Three has used mobile broadband to differentiate itself and being first to launch 4G would only add to this image.

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