Telefónica has reopened the debate on the costs of spectrum auctions in Germany, one of its strategic markets and in which it has invested the most money in frequency bidding for mobile telephony, its key business, in which it has more than 45 million lines.
The operator announced this week that it already reaches 95% of the German population with its 5G mobile telephone network. A percentage that places Germany as the first country with this coverage in the entire Telefónica group, ahead of Spain, with 87% at the end of 2023; United Kingdom, with 51%; and Brazil, with 48%.
In this scenario, Telefónica, which is in the midst of a takeover process to take its German subsidiary private, has requested a rethinking of spectrum policies in the country. Mallik Rao, technology manager and one of the company's main sources, recalled that, since 2000, telecom companies have spent more than 66 billion euros in the purchase of frequencies in different auctions.
“If we had invested the funds spent in the frequency auctions in the expansion and deployment of networks, Germany would have long been the European leader in digitalization,” warned the manager, who added that, with these funds spent in the auctions, Germany It would have fiber optic coverage in all homes, and nearly 250,000 additional mobile telephone locations. His words have special impact, since Germany is one of the European countries with the lowest fiber implantation rate.
Rao stressed that it is essential that there be more investments to reach 100% of the German population with 5G by the end of 2025, adding that Germany needs an extension of the terms of the right to use the frequencies. “Another auction worth billions would greatly delay the country's digitalization and visibly worsen existing networks,” he said.
The German regulator Bundesnetzagentur (BNetzA) is studying eliminating spectrum auctions at the end of 2025, in exchange for operators improving rural coverage. Various spectrum concessions expire next year, and the regulatory authority has not yet decided what it will do. Options include extending licenses for a minimum period of five years. In Spain, for example, the concession periods of some spectrum frequencies have been extended from 20 to 40 years.
In the 5G auction that took place in Germany in 2019, the operators together spent more than 6.5 billion euros. Telefónica alone invested more than 1,425 million euros. In this scenario, the Spanish group, Vodafone and Deutsche Telekom, as large network operators, want less cost for the spectrum and are asking for changes in the acquisition of frequencies.
The truth is that spectrum policy is once again on the table in the sector. At the recent Mobile World Congress (MWC) in Barcelona, the European Commissioner for the Internal Market, Thierry Breton, defended the need to establish conditions for consolidation between countries, and asked to work for a European system of spectrum allocation and auction, before the future 6G.
The executive also stated that spectrum policy should be given a truly European dimension and more timely and affordable auctions should be promoted. “In the technological race towards 6G, we cannot afford further delays in the spectrum licensing process, with huge disparities in the timing of auctions and infrastructure deployment between Member States,” he said. Breton also warned that Europe cannot afford the same result as in the 5G auctions, where, after eight years, the process has not yet been completed.
In this sense, states have almost always resisted this change. In general terms, since the beginning of mobile telephony, the different spectrum auctions have become a way to raise resources for public coffers. Of course, in the past taking advantage of the financial strength of the telecos. Now, the scenario is very different, given the stagnation of the results of the telecom companies, as their managers have warned on numerous occasions.
Deferral of payments
In its annual financial report, Telefónica recalls that its German subsidiary was awarded a total of 90 MHz of spectrum, for an amount of 1,425 million euros. The company, like the rest of the operators participating in the auction, reached an agreement to defer payments in annual interest-free installments until 2030, instead of an initial full payment. In 2023 and 2022, Telefónica made payments amounting to 108 million euros each year.
The current value of the debt pending payment as of December 31, 2023 amounts to 898 million euros (998 million at the end of 2022), of which 791 million have a maturity of more than 12 months (891 million at the end of 2022 ).
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