Another sort of Dutch auction from wary mobile firms

Marc Sidwell
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THERE were five winners in the £2.3bn UK auction of fourth generation (4G) wireless frequencies announced yesterday, but George Osborne was not one of them.

The chancellor was counting on a £3.5bn 4G windfall to provide a figleaf of respectability over his increasingly threadbare claims that he is reducing the UK deficit. The auction came up £1.2bn short, leaving Osborne looking more than ever like a case of all mouth and no trousers.

However, while it is bad news for all of us if the government can’t keep its promises to spend less money it doesn’t have, the chancellor’s embarrassment has its bright spots for the mobile companies and their investors.

For example, it wasn’t like this in Holland. The Dutch 4G competition last December was anything but a Dutch auction, as a bidding war ended up proving far more expensive than expected for the telecommunications firms involved. Those companies felt the pinch of buyer’s remorse as a result. KPN, one of the three main mobile players in the Netherlands, cancelled its final dividend for the year and reduced its 2013 dividend as well. Vodafone’s shares fell 2.8 per cent at the time.

The hangover from a night on the town in Holland probably fed into more cautious bids in the UK – but it may also reflect a less bullish view on likely consumer interest in 4G. That’s a pity, for Britain has been embarrassingly laggard in its adoption of ultrafast data on the go, and estimates of the resulting cost to business have been high. But slow adoption wouldn’t be too surprising. Even now, the UK 4G picture is confusing for consumers, with different flavours of 4G working with different phones. One more thing to worry about, alongside our ballooning national debt.