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Delayed arrival of 4G in UK puts nation light years behind

The UK is already seen as Europe’s most complex and fragmented telecoms market and it now looks set to add another unwanted title to its repertoire as that of Europe’s 4G laggard. Europe’s telecoms markets are already dividing into two camps of 4G “haves” and “have-nots” and the UK lies firmly stuck in the latter.  The auction proposal set out this week by Ofcom means that the UK will not see 4G LTE services go live until later in 2013 at the earliest, putting UK mobile consumers almost four years behind the world’s leading 4G markets.

Four years may not seem a significantly long period of time, but it is the equivalent of light years in the fast-paced mobile market. To put things in context, 4G adoption in Korea has already reached 17 per cent of mobile users today; by the time the UK takes its first baby steps forward in 2013, it’s reasonable to expect that Korea will have taken a giant leap towards 50 per cent adoption.

But being late to market with 4G is not necessarily all bad news. UK mobile operators and consumers alike will benefit from the fact that 4G in late 2013 will be a more mature technology, providing major benefits in the shape of a more stable technology, a greater range of devices and significantly lower equipment costs due to increasing economies of scale.

Ofcom’s auction design is championing consumer interest in the form of lower prices for mobile services above all other considerations. This is particularly evident by Ofcom’s decision to reserve spectrum for a fourth national network operator. Hutchison 3G is the most likely candidate, but there are other wildcard options that could also be waiting in the wings and ready to swoop. The UK largest fixed broadband media players, including BT, Virgin Media, Sky and TalkTalk, all represent credible, if less likely, alternative bidders. Whilst a brand new standalone entrant into the already highly competitive UK mobile market could emerge, it is more likely that the transition to 4G will result in the striking of new partnerships between existing players or trigger a wave of long-anticipated M&A activity.

Ofcom believes that by guaranteeing the existence of four national mobile wholesalers, it will be best able to promote competition at both retail and wholesale levels. But by doing so, Ofcom is also seeking to engineer the terms of competition by their own design, a huge risk given that in the long-term it remains uncertain whether the long term profitability and sustainability of the mobile sector and, therefore, consumer interests will be best served by competition between so many different players at the national market level. Today’s telecoms operators increasingly compete with global players operating in global markets, but whilst there are just a handful of major players in markets such as smartphone platforms and online search, there are more than 600 operators of mobile networks worldwide.

Written by Thomas Wehmeier who is a principle analyst at Informa Telecoms & Media, provider of strategic insight, global market data and primary research.

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