The telecoms winners and losers from today’s 5G auction

BT Group’s shares rise to a 12-month high as fortunes brighten for investors.

The result of a £1.4 billion auction of 5G airwaves today helped BT Group (LSE:BT.A) shares rise to their highest level in a year as fortunes continue to brighten for long-suffering investors.

Successful bids by BT's mobile phone arm EE totalled £452 million during Ofcom’s four-way auction of the bandwidth required to support better and faster 5G services.

There was relief that BT secured a decent chunk of spectrum without an expensive auction process, with the figure coming in well below the reported £740 million City consensus.

Vodafone (LSE:VOD) is set to spend £176.4 million, with Three owner Hutchison committing £280 million and O2 firm Telefonica (XMAD:TEF) a total of £448 million following the principal stage of the auction. Proceeds from the 34 lots will go to the Treasury.

The four companies now move on to the assignment part of the auction process, where they can bid for the frequency positions they prefer for the airwaves just secured.

The preliminary auction result comes in a big week for the telecoms giant, with the Sunday Times reporting that Ofcom will tomorrow give BT the go-ahead to make a double-digit rate of return on a £12 billion investment in full-fibre broadband.

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While uncertainty remains over the period of time that the relaxed price controls will last, BT shares have risen 9% this week on the back of the potential long-awaited regulatory breakthrough and today’s favourable auction result.

The shares are trading above 150p for the first time since February last year, having risen by more than 20% in the past three weeks. Sentiment has also benefited from chancellor Rishi Sunak’s two-year tax break on capital investment, although analysts warn that higher corporation tax rates revealed in the Budget pose a greater long-term threat to dividends.

Shares skidded below 100p last year after the company’s prized dividend was axed for the first time since privatisation in 1984, reflecting the impact of the Covid-19 pandemic as well as the need to prioritise cash for network modernisation and tackling the pensions deficit.

UBS analyst Polo Tang recently reiterated his ‘sell’ rating on the FTSE 100 stock, warning that the Budget represents a £135 million a year hit to BT’s free cash flow over the long term.

Today’s auction result, meanwhile, was welcomed by BT as “great news” for the company.

BT secured lots across both parts of the auction, with £284 million going on the 700 MHz bandwidth needed to support good-quality mobile coverage, both indoors and across very wide areas – including the countryside.

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The release of these airwaves follows a four-year programme to clear the band of its existing uses for digital terrestrial TV and wireless microphones.

The 3.6-3.8 GHz band is the primary one for 5G and is capable of carrying lots of data-hungry connections. BT secured lots at a cost of £168 million, with Vodafone’s bidding also targeting this area.

The Ofcom auction should increase the total amount of spectrum available for mobile technology in the UK by nearly a fifth. Any device that communicates wirelessly needs spectrum – such as televisions, car key fobs, baby monitors, wireless microphones and satellites.