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Vodafone Faces Fivefold Spectrum-Fee Jump in Proposed U.K. Rules

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Oct. 10 (Bloomberg) -- Vodafone Group Plc, Telefonica SA and others may have to pay bigger fees to the U.K. for rights to use spectrum after regulators increased the amount based on money raised in recent air-wave auctions.

Under the proposed rules, fees for Vodafone and Telefonica’s O2 unit will increase fivefold. They’ll owe 83.1 million pounds ($132.4 million) per year for rights to use the 900 megahertz and 1800 megahertz spectrum bands, up from 15.6 million pounds previously, regulator Ofcom said in a statement today.

The new rules are expected to take effect next year, pending a consultation period that ends in December, Ofcom said. The British government asked Ofcom to recalculate the fees to reflect “full market value” after carriers spent billions on new licenses worldwide. This year, the U.K. raised 2.34 billion pounds in a spectrum auction for airwaves that would carry high-speed mobile Internet traffic.

“Spectrum is a valuable and finite national resource, and charging for it can incentivize the optimal use of frequencies,” Ofcom said in the statement.

Mobile network operators pay 64.5 million pounds a year total to use the two bands, which carry voice calls as well as third- and fourth-generation mobile data signals, according to the statement. The proposed fee increase would bring that to 308.9 million pounds.

The fee increase isn’t as steep for EE, a joint venture of Deutsche Telekom AG and Orange SA, and Hutchison Whampoa Ltd.’s Three. EE will pay 107.1 million pounds, up from 24.9 million, and Three’s annual bill will rise to 35.7 million pounds from 8.3 million pounds.

Their figures relate to the companies’ holdings after EE’s sale of spectrum to Three, which is expected to be completed in 2015, Ofcom said.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

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