Summary of the Swiss Spectrum Auction

1. Summary of the Swiss Spectrum Auction • ITU Regional Development Forum for Europe and Seminar for Europe and CIS, 7 – 9 May 2012, Warsaw, Republic of Poland • Urs von Arx, Head of Section Mobile and Satellite Services, 9 May 2012

2. Overview • Frequency situation • Existing licenses • New frequencies • Tender process • Award alternatives • Licenses • Schedule • Auction design • Combinatorial Clock Auction (CCA) • Spectrum packaging • Spectrum caps • Minimum bids • Auction results • Summary

3. Frequency situation Tender process Auction design Auction results Summary Why a tender? • Current licenses will end within the next 2 - 4.5 years • Today's GSM-licenses (900 MHz and 1800 MHz band) will end at 31.12.2013 (former Tele2 frequencies in the 1800MHz band are already available). • UMTS licenses (2.1GHz band) will end at 31.12.2016 former „Telefonica“ frequencies are already available • New frequency bands for mobile use available • 800 MHz band (digital dividend) from 2013 good propagation • 2.6 GHz band (UMTS extension band):  suitable for LTE

4. Technology Why Refarming Frequencysituation Situation in Switzerland Situation in Switzerland Small Refarming Objectives/ Challenges Tender Process Tender Process Conclusion Conclusion Tender process Auction design Auctionresults Summary from now from 1.1. 2014 from 1.1. 2017 Spectrum Availability in Switzerland from 1.1. 2013

5. Frequencysituation Tender process Auction design Auctionresults Summary Award alternatives • Direct assignment • Beauty contest • Auction Auction chosen due to • Transparency of the procedure • Marked determines frequency values • Marked determines the appropriate allocations not the regulator (small frequency blocks support tailor-made allocations to suit market needs according to the operators business models) • Non discrimination of attendants (no privileges for incumbents and new entrants) • Maximizing state revenue was not a target

6. Frequencysituation Tender process Auction design Auctionresults Summary Licenses • Period • Until end of 2028 (security of planning and investments); frequencies can be used from that point in time when they are available • Transition period for frequency refarming (900/1800 MHz) • Newly acquired spectrum must be available to operators nationwide by 01.01.2015. For the regions Basel and Geneva a deadline of 01.01.2016 applies. • Operator proposal to ComCom • Technology neutrality • Flexible usage with regards to the future evolution of transmission technologies (beside GSM, UMTS and HSPA further new technologies HSPA+ and LTE) • Obligations • Coverage obligations: • - 50% of population for frequencies < 1 GHz • - 25% of population for frequencies in the 1800 MHZ and 2.1GHz (FDD) band • - general utilization obligation for TDD frequencies and frequencies in the 2.6GHz band • No further obligations with regard to QoS (left to the operators) • Rights of use may be withdrawn without compensation (surveillance) if the required coverage is not provided (end 2018 (800MHz), end 2020(900MHz), end 2020 (1800MHz), end 2021 (2.1GHz), end 2019 (others))

7. Frequencysituation Tender process Auction design Auctionresults Summary Schedule • Analysis, definition of strategy 2008 / 2009 • Public consultation 2009 • Opening the invitation to tender 30. November 2010 • Postponement of the submission date 8. 2. 2011 • Hearing 28. 2. 2011 • Continuation of the invitation to tender 19. 6. 2011 • Submission of candidature documents 30. 9. 2011 • Decision on admission Nov. 2011 • Holding of the auction 6. – 22. February 2012 • License award May 2012

8. Frequencysituation Tender process Auction design Auctionresults Summary Process overview

9. Frequencysituation Tender process Auction design Auctionresults Summary Combinatorial Clock Auction: Key features • Flexible format, nearly independent from number of bidders • The number of licenses as well as their frequency endowments is determined by market needs • Bidder can bid on combination (packages) of different frequencies (depending from their business model) • Aggregation risk minimized • Strategic bidding minimized, CC format requires disclosure of real bidding willingness • Second price rule to motivate truthful bidding

10. Frequencysituation Tender process Auction design Auctionresults Summary Combinatorial Clock Auction- the process Principal Stage Yes(increase price of band(s) with excess demand) Excess demand in any band Clock rounds Yes No Excess demand in any band Supplementary round Lot application No Assignment round Auction end

11. Frequencysituation Tender process Auction design Auctionresults Summary Combinatorial Clock Auction • Principal stage/ clock stage • Determination of the extent of frequencies that are to be awarded to each winning bidder and the base prices that have to be paid by winning bidders • Bidder can bid on combination (packages) of different frequencies (depending from their business model) • Limitations by spectrum caps • Assignment stage • Follows the principal stage • Determination of the specific frequencies that are awarded to each winning bidder and any additional prices that must be paid by bidders for being assigned specific frequencies. • single round of (sealed) bidding • Winner determination • The winning bids are the combination of those bids that generate the highest total value • Second Price • At most one bid from each bidder

12. Frequencysituation Tender process Auction design Auctionresults Summary Minimum bids • Generally pricing is based on art. 23 OFMRL: Minimum bid must not be lower than the sum of the yearly frequency license fees over the total license period plus the costs for the tender procedure • For most attractive frequencies (800MHz and 900MHz band) the minimum bid is determined significantly higher • Note: Candidates must submit a bank guarantee; the amount guaranteed by the bank corresponds to at least 50% of the value of the frequencies applied for relating to the minimum bid

13. Frequencysituation Tender process Auction design Auctionresults Summary Spectrum packaging • Package size: mostly 2 x 5 MHz

14. Frequencysituation Tender process Auction design Auctionresults Summary Spectrum caps • Motivation: • The acquisition of the total 900MHz spectrum by a sole bidder shall be avoided • Suppression of any of the current operators shall be avoided • Current UMTS-operators should be enabled to acquire at least the same amount of frequencies in the 2.1GHz band that they use today • No bidder shall be enabled to acquire the major part of today's GSM spectrum (900 MHz, 1800 MHz) • No bidder shall be enabled to acquire more than 50% of the total FDD spectrum

15. Frequencysituation Tender process Auction design Auctionresults Summary Spectrum caps (cont.) • The following caps were determined: • total 2x25 MHz over the two categories A (800 MHz) and B (900 MHz); i.e. the category A and B frequencies acquired must not exceed 2x25 MHz in total • 2x20 MHz in category B (900 MHz) • total 2x30 MHz over the two categories G and H (2.1 GHz paired) • total 2x35 MHz over the two categories C and D (1.8 GHz) • maximum 2x135 MHz of the total available FDD spectrum (categories A, B, C, D, G, H and I)

16. Frequencysituation Tender process Auction design Auctionresults Summary Modalities • Electronic auction via internet • Auction server on the business premises of DotEcon in London • Control of the auction by the auctioneer on the business premises of OFCOM in Biel, Switzerland • Bidders can join the auction at their headquarters • In order to avoid collusion between the bidders all information with regard to name of bidders, name of winners, frequency endowments as well as the auction price for the acquired frequency will be published after the auction has finished

17. Frequencysituation Tender process Auction design Auctionresults Summary Auction process • 4 interested parties submitted a candidature document • 3 parties were approved by ComCom to take part in the auction • Orange Communications SA, Sunrise Communications AG, Swisscom (Schweiz) AG • Duration of the auction • 6 – 22 February 2012 • 51 clock rounds (8 days, 4 – 8 round per day) • Increment of 5% in categories with excess demand • 2 day break between clock rounds and supplementary round • 8 hours for the supplementary round • 1 day break between supplementary round and assignment round • 2 hours for assignment round

18. Frequencysituation Tender process Auction design Auctionresults Summary Auction results • Overall result of the auction: CHF 996'268'000 (64% above reserve price) • 1 block in 2.6 GHz unsold • TDD blocks in 2.1 GHz unsold

19. Distribution of the frequency spectrum (I) Frequencysituation Tender process Auction design Auctionresults Summary

20. Distribution of the frequency spectrum (II) Frequencysituation Tender process Auction design Auctionresults Summary

21. Allocation of the frequency spectrum Frequencysituation Tender process Auction design Auctionresults Summary

22. Frequencysituation Tender process Auction design Auctionresults Summary Summary: Goals of the allocation achieved • Consumers benefit: üTechnological innovation continues; new broadband services.üHigh quality and good coverage • Technological progress supported:üfree choice of technology üOperators can use LTE (high-speed broadband even in peripheral regions) • A frequency allocation with a promising future:üAll network operators acquire good spectrum + more spectrum • Long-term planning and investment security:üNetwork operators can plan up to 2028 • Appropriate proceeds from the auction:üA scarce public resource valorised appropriatey üBenefits the community

23. Thank you for your kind attention All information available under: www.bakom.admin.ch or mail to urs.vonarx@bakom.admin.ch Auction Workshop: 13 / 14 September 2012 Biel, Switzerland