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MEPs Agree Multi-Billion Euro Boost for Mobile Companies
The measure is retrospective so current spectrum licences would be automatically lengthened, generating huge value for mobile operators but potentially removing a large source of income for national governments.
The amendments relate to the “connected continent” legislative package put forward by the Digital Agenda Commissioner Neelie Kroes and currently making its way through the European Parliament. They were agreed by the Parliament’s industry Committee, ITRE, yesterday.
The minimum duration for spectrum licences was absent from the Commission’s draft regulation when it was presented in September last year. In December, Pilar del Castillo, the conservative MEP and rapporteur for the legislation, added an amendment that would extend licences to thirty years. Following negotiations between the main political groups in the first months of this year, the “compromise amendments” have reduced this to 25 years.
The amendments say: “The duration of all existing rights of use of spectrum is hereby extended to 25 years from their date of grant, without prejudice to other conditions attached to the right of use and to rights of use of indefinite duration.” This exceeds significantly the term of current licences in Member States, which typically run from 15 to 20 years.
MEPs believe the measure would provide greater certainty for mobile operators and stimulate the moribund secondary market in spectrum. The financial benefits to mobile operators would be huge as they would not have to spend hundreds of millions of euros to renew their licences in auctions.
One example is the 2 GHz licences, typically used for 3G services, which are coming up for renewal across Europe in the next few years. They expire in 2016 in the Netherlands; in 2020 in Germany and Austria and in 2021 in Greece, Italy, Denmark and Belgium.
PolicyTracker has calculated that based on prices paid for 2 GHz since 2008, three mobile operators E-Plus, T-Mobile Deutschland and Vodafone Germany could expect to pay about €177M each to renew their licences. This would generate revenues of about €530M for the German government. Operators in the other countries are likely to pay less, based on smaller population sizes.
An automatic and retrospective extension of licence terms will also increase the value of mobile operator’s assets on their balance sheets. If the amendments become law the German 2 GHz licences would expire in 2039, making them worth much more than a licence which has only 2 years left to run.
“What these MEPs have agreed constitutes a massive change in the regulation of the mobile industry in Europe,” said PolicyTracker’s Managing Director, Martin Sims. “None of the existing licences will be re-auctioned, meaning that administrations will lose billions of Euros in revenues. Governments can compensate by greatly increasing annual fees for the use of the spectrum but this raises a whole new set of issues, like how those charges will be calculated.”
The amended “connected continent” package now needs to be approved in the plenary session of the European Parliament on April 2. To pass into European law it will need to be approved by the EU Council of Ministers and have a second reading in the Parliament, after the forthcoming election.