One of the worst fears of Germany’s three incumbent mobile network operators (MNOs) may now be realized: the market’s upcoming 5G spectrum auction could usher in a fourth MNO to the market less than five years after the number of mobile network players was reduced from four to three.
1&1 Drillisch, the mobile virtual network operator (MVNO) that in 2014 enabled Telefónica Deutschland to gain approval for its merger with rival E-Plus, has now announced it will apply to participate in the auction of 2 GHz and 3.6 GHz spectrum bands and, if successful, will build and operate its own 5G network.
The MVNO will join Telefónica Germany, Telekom Deutschland (Deutsche Telekom’s local unit or NatCo), and Vodafone Germany as bidders in the 5G auction, which is now expected to take place in March. 1&1 Drillisch also said it has secured $3.2 billion in credit lines to finance the acquisition of new spectrum assets.
1&1 Drillisch has been in a somewhat unusual position since 2014, when it agreed to acquire 20 percent of the capacity of all mobile networks that came under the control of Telefónica following the completion of the E-Plus takeover. The MVNO also had the right to buy a further 10 percent of network capacity. The agreement enabled Telefónica to gain approval from the European Commission to buy E-Plus from KPN and merge the operator with its O2 Germany business.
The contract also gave 1&1 Drillisch access to Telefónica’s future 5G network. However, that is clearly not enough for the virtual operator, which has long been nursing ambitions to become a full-fledged MNO with all the associated benefits.
As you might expect, the three existing MNOs have been strongly opposed to the idea of a fourth operator, particularly in the 5G era, and were angered by the decision of regulator Bundesnetzagentur to allow a new entrant to take part in the 5G auction. The MNOs have also filed separate legal actions over the 5G spectrum award conditions in a bid to gain legal clarity over matters such as national roaming and network sharing, the obligation to allow service providers to access future 5G networks, and “ambitious” 5G coverage requirements.
Despite their reservations, Telekom, Telefónica, and Vodafone all filed their applications to take part in the auction. Indeed, the very idea of losing out on the opportunity to gain valuable spectrum assets for 5G clearly cannot be entertained, nor can they allow Germany to fall behind other markets in the race to roll out 5G.
According to Vodafone Germany, “Germany needs first-class 5G infrastructure, which will keep our entire economy at the top in the future. 5G can — with an investment-friendly policy — become a network revolution that brings new applications to many sectors and industries and makes our everyday lives more livable in many areas. We will invest in 5G to create further growth, competition, and prosperity for our country. Vodafone has therefore registered to participate in the 5G auction.”
Telefónica said it sees major business opportunities in 5G, “particularly in the context of Industry 4.0. The new mobile standard is likely to result in the development of new and innovative applications.”
According to Markus Haas, CEO of Telefónica Deutschland, “it is more important than ever for politics and business to come together, because we need clear and fair conditions which promote investment above all else. Germany cannot afford to fall behind.”
Deutsche Telekom, meanwhile, said the frequencies being auctioned “are an important basis for the establishment of 5G networks in metropolitan areas and for industrial applications. By participating in the auction, we are pursuing our objective of providing the best mobile coverage for consumers and industry. In the future, the networking of machines, and the Internet of Things will become increasingly important.”