No new entrant in Swiss auction but Sunrise may bid for cableco

The prospect of a new entrant into the Swiss mobile sector did not become reality in the country’s first 5G-oriented auction, but the market structure could change in another way if cable group Liberty Global sells its Swiss operation to local player Sunrise, or if Vodafone, as has been rumoured, enters the country.

In the auction, the three existing MNOs – Swisscom, Sunrise and Salt – paid a total of CHF380m ($385m) for spectrum in the 700 MHz, 1.4 GHz, 2.6 GHz and 3.5 GHz bands. Swisscom snapped up 46% of the airwaves on offer, but paid more than the other two combined, while the only other bidder, Dense Air, dropped out.

This was another missed opportunity for a regulator to earmark some spectrum for a new entrant, particularly one which would support much-needed enterprise and industrial services on a neutral host basis. That is the model for Dense Air, a subsidiary of vendor Airspan, which has secured licences in some markets such as Ireland and Portugal. However, when forced to bid for national licences on the same basis as the incumbent MNOs, it is hard for a start-up to stand a chance (Dense Air also had to drop out of the UK’s 3.5 GHz auction, though that country is consulting on a possible allocation for neutral host or shared networks in its next round of spectrum sales, in 3.6-4.2 GHz).

However, governments will always be tempted by the depth of MNOs’ pockets and target short term revenue rather than the success of their longer term 5G visions, which tend to be heavily focused on enterprise services that are tough for mainstream operators to delivery on generic networks. The sale raised over 50% more than expected and awarded 15-year licences to all three operators.

Swisscom paid CHF196m for its licences – this sum is not included in its 2019 capex projections, which it made while insisting it would not spend more on 5G than 4G. It plans to invest CHF2.3bn in capex this year, down from about CHF2.4bn in 2018. It won 2×15 MHz blocks of 700 MHz spectrum, 50 MHz of 1.4 GHz, and 120 MHz of 3.5 GHz.

Sunrise paid CHF 89.2m for 20 MHz of 700 MHz, 15 MHz of 1.4 GHz and 100 MHz of 3.5 GHz. “We were able to acquire the strategically most important bands at a very favorable price per MHz, even better than the competition,” said CEO Olaf Swantee. “A look abroad shows that providers in countries like Italy and the UK had to spend much more money for the most important frequencies. We are therefore very satisfied with the outcome of the auction.”

Salt paid CHF 94.5m for 2×10 MHz of 700 MHz, 10 MHz of 1.4 GHz, and 80 MHz of 3.5 GHz spectrum.

However, some incremental 2.6 GHz spectrum was left on the table, as were frequencies set aside for supplemental downlink, suggesting the Swiss operators are not running short of capacity for LTE expansion, but want to start preparing for 5G.

There may not have been a new entrant via the auction, but Sunrise could become a bigger fixed/mobile player if it acquires Liberty Global’s local unit UPC Schweiz – though that could also become a lure for Vodafone, some speculate.

Swiss telecommunications company Sunrise has confirmed that it is in discussions with Liberty Global regarding a possible acquisition of its Swiss cable subsidiary UPC Schweiz. The would-be acquirer said in a statement: “Sunrise will only pursue a transaction that is strategically compelling and demonstrably value creative for its shareholders. In the event of a transaction, Sunrise is committed to a prudent capital structure and will retain its existing progressive shareholder distribution policy.”

Liberty has recently sold cable subsidiaries in Austria, Germany and some eastern European countries, and its DTH satellite operations in central and eastern Europe. It also has a joint venture with Vodafone in The Netherlands.