Italy’s 5G auction is over, but will the €6.5bn spectrum investment ever pay off?

Italy's auction for 5G spectrum has exceeded everyone's expectations, netting over €6.5 billion after 14 days of intense bidding. The amount raised is more than double the country’s initial target, surpasses the €3.9 billion raised in the 4G multi-band auction held in 2011 and could be compared to 3G auctions in the early 2000s when bids totalled €12 billion. However, these results – boosted by the 3.7 GHz band bidding hitting the €4 billion barrier – might only be a good thing in the eyes of the Italian Ministry of Economic Development (MISE). Before 2017, the average price of spectrum around 3.7 GHz was $0.015/MHz/POP, but according to our database, since Europe recognised 3.4-3.8 GHz as the region's 5G priority band, prices have increased more than ten-fold. Bids closed yesterday in Italy at $0.42/MHz/pop, significantly higher than the UK and Spanish tenders, which attracted prices of $0.17/MHz/POP and $0.06/MHz/POP respectively earlier this year. As the sky-high bill suggests, this could be another worrying flag to investors and operators. Italy's operators had threatened to boycott the current tender in protest at high starting prices and rigid bidding rules.  They eventually had a change of heart. But do mobile providers have any choice but to buy 5G spectrum?

This should also come as a warning for EU legislators who have agreed on rules stipulating that administrations must set up fair and balanced prices rather than simply seek to maximise revenues. 

The country's telecoms trade unions have expressed their concerns over these prices, suggesting they could hinder future deployments. "The auction took place in an uncontrolled regime, without a rational analysis of the investment and hypothetical and profitable revenues related to ultra-broadband services," they said.

Some point to Italy's uneven distribution of spectrum – the regulator made two blocks of 80 MHz and two blocks of 20 MHz available in the 3.6 GHz to 3.8 GHz bands – as the reason for the aggressive bidding. Others claim that European regulators' habit of encouraging the emergence of new operators to create more competitive telecoms markets was the key factor (Iliad, the firm that shook things up in France by triggering a price war, entered the Italian market earlier this year and took part in the auction). The question now is whether the Italian prices are an aberration or a trend to be repeated across the continent.•