Tuesday, 7 August 2012

Chile's 4G spectrum goes quietly... and cheaply

In all the excitement about Ofcom's announcements regarding the UK's digital dividend auction, the mainstream press missed the latest country to auction off its spectral assets.

Although its only the continent's 6th most populous country, Chile is interesting as it is the most stable and prosperous large country in Latin America and therefore hints at the future direction of other markets on the continent. The results of their regulator, Subtel's auction for 2,600MHz spectrum, suitable for the high bandwidth component of LTE were released on July 31st.

Three operators acquired the spectrum: Claro - a subsidiary of America Movil, local telco Entel and Movistar, a subsidiary of Telefonica.

What interests me most is the low price this spectrum went for. Entel paid the most for their block - $8.84Mn - but even this is a sixth of the global average price for this spectrum in terms of MHz per capita. Market leader, Claro, paid only five percent of the average for their block.

As far as I can see, the reason for this was the lack of alternative bidders for the spectrum. The three winners were the only three bidders. Subtel will hope that this and the aggressive license terms - 98% population coverage in 2 years - will lead to economic benefits. They will also hope for a larger windfall from their more valuable digital divident spectrum at 800MHz.

Even so, the lesson for Ofcom here is that competition for licenses remains the best way of ensuring a good return on the assets. 4 bidders for 4 licenses is not the best outcome for the UK.

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