Vodafone, EE, O2 and Three face a combined spectrum licence fee increase of £135.2m per year after Ofcom put forward its final proposals for the new annual fee in a move that could prompt operators to increase prices.
The final increase is around £25m less than the original combined fee of £159m put forward by Ofcom in February.
Individually, EE faces the biggest hike, with its annual spectrum use fees rising from £24.9m to £75m. O2 and Vodafone will both see the same rise, from £15.6m to £49.8m.
Three sees the smallest increase, rising from £8.3m to £25m.
Philip Marnick, Ofcom’s group director of spectrum, said the price rise was needed to ensure the operators were paying a fair price for such an important economic commodity.
“The mobile industry has not previously had to pay market value for access to this spectrum, which is a valuable and finite resource, and the new fees reflect that value,” he said.
Ofcom also said it would require the operators to pay their fees on a set payment date, changing the current system where they get to choose when they pay. The fees will be staggered on introduction, with half the increase from October 2015 and the full fee in 2016.
EE criticised the final fees from Ofcom, saying it had got the valuations “wrong” and warned that prices may rise as a result.
“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,” it said.
"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.”
O2 said it was "examining the decision in detail before deciding how best to proceed", while Vodafone was also critical of the increases, pointing out that they come at a time when it is investing heavily in its network.
"We will be reviewing Ofcom's proposed spectrum fees over the coming days as they represent a significant increase when we are already investing around £1bn on our network and services this year," a spokesperson said.
Three had not responded to a request for comment.
While prices could rise as a result of the increase, Ofcom said it felt the new fees were fair and proportional and operators had known about the rise for some time.
“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,” it said in a statement.
“The fees announced today are in line with analysts’ expectations and with the amounts that operators pay for accessing spectrum in other countries.”
A pill to swallow
Despite the risk of bills increasing, Kester Mann, principal analyst at CCS Insight, said operators had little choice but to accept prices would rise.
"Operators will inevitably protest at the large hike in fees and are likely to warn that investment in networks and services will be impacted as a result. However, the reality is that this is a pill the providers are going to have to swallow," he said.
"In one of Europe’s most competitive markets, they have no choice but to continue to make improvements to coverage and capacity and have little margin to adjust pricing to compensate.”
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