This week has seen a series of forecasts of LTE subscriber growth which will proceed at a faster pace than originally anticipated. The GSM Association, indeed, believes that half the world’s population will be covered by LTE as early as 2017.
GSMA Intelligence, the operator body’s research arm, forecasts that the number of LTE networks will almost double between 2013 and 2017, hitting 500 at the later date, and that the number of connections will rise almost sixfold, from 176m to over 1bn in the same period.
The figures come hard on the heels of a report from Informa, which calculates that LTE subscribers will rise in number from 188.6m at the end of this year to 1.3bn at the end of 2018, a sevenfold increase over the five-year period.
The drivers of the accelerated growth, which will outpace that of 3G, include allocation of more spectrum, and the launch of affordable handsets, according to the GSMA’s chief strategy officer, Hyunmi Yang. He also credits carriers’ roll-out of ‘innovative tariffs that encourage adoption of high speed data services’ ‘ though, of course, many cellcos, having abandoned 3G-style unlimited pricing, are still struggling to find a charging structure which will attract customers and also deliver profits.
From the consumers’ point of view, the new tariffs and the need for greater mobile speed and capacity, is making LTE very attractive. Migration from 3G to 4G is happening more quickly than the transition from 2G to 3G, says the GSMA. That also presents challenges for some operators. While LTE lowers cost of data delivery and uses spectrum more efficiently, networks will still come under strain under the scale of usage. LTE users consumer 1.5Gbytes of data per month on average, says the report, which is twice the amount used by non-LTE subscribers, and likely to grow.
Both reports identify the US as the largest LTE market in 2013, currently accounting for almost half of connections – 46% according to the GSMA, which expects Asia to overtake by 2017, driven by huge deployments in China and India.
T-Mobile cries foul over Austrian auction
This week T-Mobile and 3 began legal proceedings against the Austrian telecoms regulator (TKK) following the sale of the 800MHz, 900 MHz, and 1800MHz frequencies in the country in October, claiming that the auction favored incumbent Telekom Austria.
They claim the auction was illegal and highly damaging’ with ‘non-transparent rules’ and a ‘disproportionate auction design’. The auction was delayed by a year after Hutchison’s 3 acquired Orange Austria in October 2012.
Then the TKK was criticized prior to the sale, for its decision to use a combinatory clock auction system. The companies involved in the bidding had previously expressed their fear that it would lead to ‘irrationally high prices,’ with the combined minimum starting bid set at €526m. The Austrian government pledged half of the money to a universal broadband fund and to support IT research.
This auction process allows bidders to place bids on combinations of packages, instead of the more typical system of bidding for single items or packages. The complexity was compounded by restrictions on communication during the auction, sais participants, and an injunction that prevented them from even declaring their interest. The TKK said that this was to prevent collusion in the marketplace.
The Austrian auction is not the first to generate headlines recently. The high price of the December 2012 Dutch spectrum auction led to KPN withdrawing its offer after its share prices took a hit. And the Czech Telecommunications Office cancelled its March auction after the combined total bids broke the $1bn, fearing this would ‘translate into excessive charges’ for Czech customers (that sale was subsequently re-run last month).
Bloomberg reports that Telekom Austria (TKA) spent €1.03bn on 28 blocks of spectrum, while T-Mobile spent €654m on nine packages, and 3 bid €330m on the remaining five. TKA clearly received the best value per band, as the auction raised nearly four times the reserve price.
3 Austria’s CEO Jan Trionow labelled the outcome ‘a disaster for the industry’, brought about by the decision to use the controversial auction format. The allegedly inflated cost that was paid by the operators will, the challengers argue, be a barrier to investment and development of the mobile networks to harness the newly acquired frequencies.
T-Mobile’s CEO Andreas Bierwirth voiced concern that the auction outcome was more expensive than comparable European auctions. The need to acquire spectrum to support the exponential increase in data consumption fuelled the bidding between the three companies, and the high cost could well be passed on to their customers, he argued.
With two of the three bidders now involved in legal proceedings protesting the outcome of the auction, the TKA has, in the meantime, successfully launched a €750m eight-year bond that has met with strong demand. It will go some way to covering the cost of the latest spectrum purchases.