Italy’s auction of speedy 5G airwaves generates RM12b

MILAN • Italy raised a preliminary €2.48 billion (RM11.95 billion) in an auction of airwaves for 5G mobile services, a test of how much telecom companies are ready to pay for a technology whose commercial potential is still unknown.

Telecom Italia SpA, Vodafone Group plc’s local unit, Wind Tre SpA, Iliad SA and Swisscom AG’s Italian unit Fastweb SpA all bid for the spectrum, Italy’s development minister said in a statement late on Monday.

As a newcomer, France’s Iliad had a special right to bid for a reserved package of 700MHz frequencies, the most valuable. It paid about €676.5 million, according to the statement.

The carriers will be allowed to increase their offers on Sept 13 as they vie for the scarce resource.

5G auctions across Europe represent a challenge for the region’s smaller mobile phone carriers. Their long-term business models could struggle if the larger players squeeze them out of important spectrum, New Street Research analysts James Ratzer and Andrew Entwistle wrote in a note yesterday.

In Italy, “the auction will be an interesting test case of Iliad’s financing capacity and its longer-term commitment to the Italian market”, the analysts said.
Telecom Italia shares in 
Milan were up 1.1%, while Iliad rose 2.4% as of 10:07am in Paris yesterday.

For Italy’s government, 5G is a way to boost the digitisation of public services and economic growth. The spectrum sale could also pull in €2.98 billion for the state, the New Street analysts said, higher than the government’s budgeted estimate of at least €2.5 billion.

Italy’s biggest phone companies had threatened to boycott the auction because they said the bidding rules were too rigid and the starting price was too high, people familiar with the matter said in June. They eventually relented.

Their concerns were driven partly by the slow payback from 4G spectrum sold in 2011, and concern that Iliad’s arrival will lead to the kind of protracted price war that already hammered industry profits in its home market of France.

A botched sale could have punched a hole in Italy’s accounts in a year where investor concerns have centred around the country’s future in the euro-area after the Five Star Movement and the League — two Eurosceptic parties — formed a coalition government.

The starting price for the 700MHz airwaves, currently used by TV broadcasters, was about €2 billion for six slots in total. Each bidder may try for a maximum of two. Those frequencies are the most effective in terms of covering large areas with a strong signal. — Bloomberg