Quick Scan Reserve price DVB-T

Based on a Quick Scan of international auction results and public data on the current licensee, SEO/IViR recommends to maximally set a low but non-trivial reserve price of e.g. € 1 million for the auction of the DVB-T license.

KPN/Digitenne and NPO are the current licensees in the Netherlands for DVB-T. They make use of the UHF band (470-790 MHz). The current licenses have a duration of 15 years and will expire on 31 January 2017. The Minister of Economic Affairs is responsible for the allocation of the spectrum and plans to auction the frequencies for commercial use as of May 2016. The new license will be valid as of 1 February 2017 and have a duration of 13 years. In order to speed up the progress of the auction and to exclude non-serious applicants, the minister is considering to set a reserve price for the auction that will serve as the starting price for the bidding process. The Ministry of Economic Affairs has asked SEO to perform a Quick Scan regarding the possible height of the reserve price.

If the objective is to set a ‘realistic’ reserve price that is related to the expected value of the DVB-T spectrum, 40% of the estimated market value can be considered the absolute upper limit for the reserve price. In order to further reduce the risk that the spectrum will remain unallocated due to a reserve price that is too high, it is deemed wiser to set a reserve price of 20-30% of the estimated value.

To estimate the spectrum’s market value, an international benchmark study was performed that looked at the market prices in other countries for a similar spectrum under similar conditions. In addition, a business case approach was used in an attempt to estimate the value of the spectrum based on figures from public sources regarding Digitenne’s current operation. The international benchmark study yielded values ??of roughly €0.35 ~ 52.3 million. These values ??must be treated with great caution, though, since the benchmark study basically does not provide enough material for comparison and presents a very diverse picture. The uncertain picture that arises from the international benchmark study is confirmed by the business case approach. Using this approach, the bandwidth that is deemed most plausible for the value of the new license for KPN is €0 to €18.5 million. However, this bandwidth is based on several assumptions that could not be verified in more detail within this study. Other choices regarding those assumptions would lead to values that are higher or, conversely, even negative.

The report concludes that the market value of the license is highly uncertain, which carries the risk that every reserve price that is based on such a value assessment may result in the license not being issued. This study therefore recommends to set a low but non-trivial reserve price at most, which is purely intended to deter non-serious bidders. An amount of e.g. €1 million would meet this requirement.

The research report is part of the consultation process implemented by the Ministry of Economic Affairs. More information can be found at the website of Overheid.nl