The procedure 5G auctions started this Tuesday, September 29 at 9:30 a.m. Bouygues Telecom, Free Mobile, Orange and SFR * will compete for the 3.5 GHz frequency band. The highest bidder will take the most spectrum and will leave with a big advantage to conquer the public in the race for 5G.
Are the operators gathered around a table?
No, this is the first time that the auctions for mobile telephony will be conducted in a dematerialized manner. Until now, the emissaries of each operator were each locked in a room with no communication with each other to avoid any agreement. They wrote the sums on small, neatly folded pieces of paper. A cold war atmosphere and somewhat artisanal methods that belong to the past. This year, each party will attend the proceedings online and remotely behind their computer.
What are the different stages?
First, there is the main auction, which is about the amount of frequencies and has multiple rounds. There will be a second one-round auction in October which will determine the place of candidates on the 3.5 GHz band. This second part will determine the orders to the equipment manufacturers, some materials being more suitable than others depending on the position obtained.
How much frequency is involved?
As a reminder, each operator has already been allocated a 50 MHz block at the fixed price of 350 million euros. It is now a matter of allocating 11 blocks of 10 MHz, with the understanding that an operator cannot exceed 100 MHz in total. This means that he will not be able to obtain more than 50 MHz and therefore 5 blocks of 10 MHz at auction.
How does the main auction work?
The auction begins with a reserve price of 70 million euros per 10 MHz block. Each candidate indicates how many blocks they are willing to buy at that price. If the cumulative demand of the four operators exceeds all of the available blocks, a new round is organized with a higher starting floor price of 5 million euros per block. The auction continues as long as the total demand is greater than 11 blocks. A priori, the price of the blocks will increase by 5 million between each turn. But Arcep reserves the right to possibly modify this amount at the end of each day.
Why this complex mechanism?
The big news that complicates everything is that Arcep will reveal at the end of each round what the operators wanted. And that from the second round, they will be able to reduce their demand by specifying the intermediate price with which they would have been ready to acquire more. They will thus play cards on the table.
All of these complex mechanisms are designed to avoid overbidding too much, as has happened previously in Italy and Germany. The goal is to allow Bercy to pocket a nice sum without ruining the operators, so that they retain the means to ensure coverage of the territory. The issue of frequencies will also be subject to a certain number of constraints.
What strategy for operators?
In the event that one of them gets too greedy, he puts the prices up dangerously for everyone, starting with him. If the four players strike a certain balance, they will all be winners.
The combinations being multiple, each operator has carefully calculated and predicted all possible scenarios with mathematical models. They are unlikely to post their real goals in the first round, but they also have no interest in advancing masked for too long and the process dragging on.
How long will this last?
Each betting round lasts approximately half an hour with a maximum of eight rounds per day. The process could therefore take several days, but Arcep estimates that it should not exceed more than ten days, maximum two weeks. Even over this limited period, auction prices could then exceed 8 billion euros.
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