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Germany’s Wireless Carriers Slip on 2014 Spectrum Auction Report

Shares of Deutsche Telekom AG (DTE), Vodafone Group Plc (VOD) and other wireless carriers in Germany fell after a report that the country’s network regulator plans to auction a new batch of long-range wireless spectrum next year.

The Federal Network Agency will seek to allocate frequencies in the 700-megahertz spectrum to mobile operators, Frankfurter Allgemeine Zeitung said yesterday, citing internal documents. Deutsche Telekom fell 2.2 percent while Telefonica Deutschland Holding AG dropped 2.1 percent and Vodafone slipped 1.6 percent. The DAX Index slid 2 percent at 10:40 a.m. in Frankfurt.

The first auction of licenses to use airwaves in the so-called digital dividend range raised 4.38 billion euros ($5.8 billion) in 2010. That spectrum has been used to roll out long-term evolution, or LTE, signals in rural parts of the country. The reported timing is earlier than expected and may strain the finances of the smaller carriers, including Telefonica Deutschland Holding AG (O2D) and Royal KPN NV (KPN), JPMorgan Chase & Co. analyst Hannes Wittig said by phone.

“A 2014 date would increase the pressure on operators,” said London-based Wittig. “Investors would probably worry most about the financial impact on Telefonica Deutschland and KPN; however, an earlier date could also be seen as a reason to accelerate discussions regarding a potential merger of the two smaller carriers.”

KPN, headquartered in The Hague, and Telefonica SA (TEF), the Madrid-based parent of Telefonica Deutschland, last year dropped discussions about a combination of their German units. KPN’s E-Plus and Telefonica Deutschland with its O2 brand vie for the number three spot in that market.

Dividend Cut

Additional spectrum would help carriers to offset the increasing strain that transfers of videos and music to mobile devices place on networks. Stefan Bloemeke, a spokesman for the network regulator, declined to immediately comment.

KPN in 2012 cut planned dividends after spending 1.35 billion euros on wireless spectrum in its Dutch home market. Unlike Telefonica Deutschland, which sold shares in an initial public offering last year, KPN didn’t obtain any long-range frequencies in Germany in 2010.

The amount of spectrum of around 700 MHz is similar to how much 800 MHz spectrum that Germany sold in the 2010 auction, Wladimir Bocquet, senior director of spectrum policy at the wireless industry group GSMA, said in a phone interview.

Distribution Calendars

The GSMA in a report today called on European governments to lay out clear schedules for spectrum distribution, especially in the 700 megahertz range. The use of spectrum for mobile services will generate 477 billion euros a year by 2023 in the European Union’s 27 member states, compared with 269 billion currently, Tom Phillips, the organization’s chief government and regulatory affairs officer, said.

“Spectrum is probably the most significant thing that gave Europe the lead in mobile technology two decades ago,” he said. “And spectrum could re-energize the European mobile market if the Europe’s governments get it right.”

The German network regulator is also working on decisions for the future allocation of old spectrum licenses expiring in 2016, FAZ reported. Operators have called for these licenses to be extended rather than redistributed.

To contact the reporter on this story: Cornelius Rahn in Berlin at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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