Qualcomm sells L-Band spectrum to Vodafone, Three for massive profit

Sod this chips lark, we’ll just flog blocks of air


As we reported in June, Qualcomm has been looking to sell its 1452-1492MHz spectrum – and it seems it's found willing buyers in the form of Vodafone and Three.

It's thought the two networks paid over £100m in total for the spectrum. The chip company rather lucked out, having paid £8.3m at auction in 2008.

At the time we saw it as the natural route for the company to roll out its MediaFLO, the mobile TV broadcast system, a rival to DVB-H. However, as both mobile TV standards proved to be dismal failures Qualcomm didn’t have a application for the substantial chunk of spectrum.

It’s only part of the 4G specification as a supplementary download frequency, and while it is close to single channel frequencies it’s not paired so would only be useful for uplink or downlink, and it’s hugely unlikely that any shipping devices would have an antenna able to support it – even if the frequency was baked into the chipset.

The bandwidth, however, is very useful for backhaul, and with the trend from voice to data usage the need to support the higher throughput requirements of carrier aggregation having an option to link sites by radio is a useful option in the infrastructure toolkit.

It is believed that EE and O2 also bid for the spectrum but EE would have been on a sticky wicket given that once its merger with with BT is complete, it will have 30 per cent of the available spectrum, and if it had bought the full 40MHz from Qualcomm that would have taken its holding to 35 per cent. The other networks are already calling for some re-farming.

Before the networks can use the spectrum they will need Ofcom approval for the purchase. The regulator told us that “at this point we have not received a spectrum trading application from Qualcomm”.

Approval, however, should not take too long, as this sale was expected and the frequencies were recently moved from being seen as part of general spectrum trading to mobile trading in anticipation.

Once Vodafone and Three apply there will be a ten-day window to back up the application, and then there is another ten days for Ofcom to decide if it should rubber stamp the deal or consult. However, as there was a consultation over moving L-Band into the Mobile Spectrum Trading Regulations most of the arguments will already have been heard, so that seems unlikely.

One factor which will have affected the value of the sale is AIP, this is the amount Ofcom charges for administering the spectrum. With the mobile frequencies this is included in a larger sum called ALF (Annual Licence Fees).

The job of ALF is to squeeze as much money out of the operators as possible “reflect the true value of the spectrum”. When that spectrum was worth £8.3m the ALF would be very different to the sum of over £100m that Vodafone and Three are believed to have paid.

The current AIP agreement with Ofcom has a number of years to run but when it expires Ofcom will no doubt look to secure a higher rate based on the sale price. Ironically the more the purchasers paid for the frequencies the more they will cost to own in the long run and the less they are worth. The financial consultants must have had fun with that one.

We contacted all the parties involved but none of them would confirm any of the figures.

Even for the multi-billion-pound telcos this is a significant transaction, and in time the amounts only need to show up in the accounts of two of the three companies involved for the full picture to emerge. ®

Narrower topics


Other stories you might like

Biting the hand that feeds IT © 1998–2022