Ofcom delays spectrum auction following legal threat from Three and O2

O2 said beginning the auction before a decision is made over its £10.25 billion sale to Hutchison is made could harm competition and increase costs 

Ofcom has delayed an impending spectrum auction following the threat of legal action from both Three and O2.

The telecoms regulator was this month due to launch proceedings for the award of 2.3GHz and 3.4GHz spectrum following the release of those bands to Ofcom by the Ministry of Defence as part of the Government’s Public Sector Spectrum Release programme.

However, Ofcom has revealed it received notice from O2 on November 19 and from Three a day later that they would bring “judicial review proceedings” against its decision to begin the process before a decision is made over whether to continue with Hutchison’s proposed £10.25bn acquisition of Telefonica UK.

On October 28, the Competition and Markets Authority (CMA) provisionally cleared BT’s £12.5 billion purchase of EE, with a final decision expected in January.

Last month, the European Commission (EC) also announced it was launching an in-depth investigation into the Hutchison/O2 deal because of concerns the merger would damage competition in the UK market. A final decision on this is expected no later than mid-May 2016.

An Ofcom spokesperson said: “After careful consideration, given these specific circumstances, we have decided for reasons of good public administration to delay commencing the auction process.

“Therefore, Ofcom will not now commence the auction process until the European Commission has taken its decision as to whether the proposed merger between Telefónica UK Limited and Hutchison 3G UK Limited is compatible with the common market.”

Both O2 and Three welcomed Ofcom’s decision to delay the auction, with the former claiming proceeding with it could have led to disadvantages for customers.

“We welcome Ofcom’s decision to delay commencing the auction process until the European Commission has made its decision on the proposed merger between Telefónica UK and CK Hutchison.

“Proceeding with a major spectrum award immediately before the conclusion of two significant competition investigations would have created uncertainty in spectrum valuation. This would have risked an inefficient auction outcome that could have harmed competition, increased costs and prevented best use of the spectrum, ultimately leading to disadvantages for customers.”