Mobile price hike warning after Ofcom triples mobile spectrum licence fees

Ofcom triples annual licensing fees for mobile operators five years after government demands they pay "full market value" for their spectrum

Ofcom is to triple the annual licensing fees charged to mobile telecoms operators for use of the mobile spectrum. The hike will see an increase in the licence fees paid by Vodafone, O2, EE and Three from £64.4m to £199.6m.

According to Ofcom, the hike in fees was demanded by the government back in 2010 in order to "reflect full market value," according to Ofcom.

It represents a reduction of the quintupling originally planned by Ofcom, and a discount on the £228.3m that it announced it would charge back in February.

The new fees will be introduced in two stages, with the first stage next month and the second stage in October 2016.

EE, as the licensee of the biggest chunk of mobile spectrum, will pay the most - £75m per year - while Three will see its fees increase from £8.3m to £25m. Both Vodafone and O2 will pay £49.8m each. The sums quoted by Ofcom take account of EE's sale of 1800 megahertz (MHz) spectrum to Three UK.

Compared to the levels proposed by Ofcom in February, the final fees for the 1800MHz band are three per cent lower, reflecting a reduction in the ‘discount rate' used to convert a ‘lump-sum value' (of the type paid by licensees when they acquire a licence in an auction) into an equivalent annual payment. This reduction reflects the most recent debt rates.

In addition, the final fees for the 900MHz band are 24 per cent lower, reflecting the discount rate reduction and the prices paid in the German auction, according to Ofcom.

When Ofcom first proposed to hike the fees five-fold, mobile operators warned that they would be forced to pass on the costs to consumers. EE remained critical of Ofcom's proposed price rises, arguing that the fees for the 1800MHz spectrum were "flawed".

"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," a company spokesman told the Daily Telegraph.

"We're also very disappointed that Ofcom has not reflected the higher costs we've taken on to meet enhanced coverage obligations that Ofcom and Government encouraged us to accept."

In a statement to Computing, an Ofcom spokesperson said: "Mobile operators have a strong incentive to invest in networks and to keep prices competitive. 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.

"We've listened carefully to the arguments and evidence put forward by industry. The fees announced today are in line with analysts' expectations and with the amounts that operators pay for accessing spectrum in other countries."