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Two of the UK’s largest mobile operators, Three and O2, announced plans earlier this year to merge, a deal that remains subject to regulatory approval. Because the merger’s outcome is still undecided, both companies face uncertainty about how much spectrum to bid for in an Ofcom auction that had been planned for around February–March.
The parent companies — Hutchison Whampoa, owner of Three UK, and Telefónica, owner of O2 — expressed their concerns in a joint letter to Ofcom. They warned that they might pursue legal action if the regulator proceeded with the planned auction of spectrum in the 2.3 GHz and 3.4 GHz bands before the European Commission had reached a decision on the merger.
Ofcom has set a reserve price of roughly £70 million for the auction. The sale covers 190 MHz of spectrum across the 2.3 GHz and 3.4 GHz bands that was formerly used by the military and is now available for mobile services. These higher-frequency bands are particularly attractive for 4G capacity and speeds, so the auction is expected to draw considerable interest from mobile operators.
The merger decision for O2 and Three is not expected before March or April at the earliest. Even then, delays or complications could push the timetable back. Matthew Howett, a telecoms analyst at Ovum, has noted that an early spring decision is optimistic and that the process may be more protracted.
If the merger is approved, the combined company would control roughly 40% of the UK mobile market, which explains the high level of regulatory scrutiny. Market concentration is a central concern for competition authorities evaluating the public interest implications of the deal. For context, EE — currently the UK’s largest mobile operator — received provisional clearance in October for a merger with BT, the country’s largest fixed-line broadband provider.
Ofcom’s spectrum auctions have produced substantial revenues in recent years. In 2012, the regulator raised £2.34 billion by selling 4G spectrum that became available after the end of analogue television transmissions. The largest windfall on record remains the £22.5 billion raised in 2001 from the 3G spectrum auction.
The decision to delay the auction highlights the tension between timely spectrum allocation and the need to avoid interfering with ongoing merger reviews. Operators need clarity to plan network investments, but regulators must also ensure that competition concerns are fully examined before allowing structural market changes.
As the regulatory review continues, key questions remain: whether the merger will be approved, whether divestments or remedies will be required, and how those outcomes will influence operator strategies in upcoming spectrum auctions. The timing and structure of the auction may be adjusted depending on the European Commission’s decision and any conditions attached to the merger.
Do you think Ofcom made the right decision to delay the auction? Let us know in the comments.