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Jump in spectrum charges could mean bill hike for mobile customers

Article By: ,  Financial Analyst
September 24, 2015 6:36 PM

Mobile phone customers may see their phone prices rise, following a rise in the fees Ofcom charges operators.

The regulator has revealed that the prices it charges mobile phone networks to use spectrum in the UK will be going up. It will now collect £199.6 million a year from Vodafone, O2, EE and Three to use mobile bandwidth. Currently, it receives £64.4 million annually.

Philip Marnick, Ofcom's group director of spectrum said: "We have listened carefully to the arguments and evidence put forward by industry, and conducted a complex and comprehensive analysis to determine the new fees."

He noted that the mobile industry has not previously had to pay market value for access to the spectrum, adding that it is a valuable and finite resource. "The new fees reflect that value," he said.

The fees paid vary for each operator, depending on which tranche of bandwidth they use. Under the new charges, Vodafone and O2 will see their fees go up from £15.6 million a year to £49.6 million. EE's payment will go up from £24.9 million to £75 million and Three's will rise from £8.3 million to £25 million.

Ofcom says the new fees will be introduced in two phases, the first of which will be in place by the end of October 2016.

Price rises for consumers

The mobile operators say that the increase in spectrum charges will probably result in hire bills for customers – and it could stall roll-out of 4G networks.

However, Ofcom says that operators have had plenty of time to prepare for the fee increases.

"The operators have had five years' notice that the fees would be increased to reflect full market value and we expect them to have budgeted for this," said a spokesman.

But the operators disagree.

A spokesman for EE said that Ofcom was wrong and that the new licence fees were based on a "flawed approach".

He said: "The trebling of fees is bad news for British consumers and business as it raises the risk that we won't be able to offer the best prices and invest and innovate at the pace we and our customers would like."

In London, share prices for Telefonica – the parent company of O2 – dropped 1.61 per cent  to 10.69 on Thursday (September 24th). Shares in Vodafone Group dropped 1.18 per cent to 213.45.

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