Spectrum licence
Sector Deep DivesA time limited state granted right to transmit on a band of radio frequency, normally awarded by national auction.
Also written: spectrum, spectrum licences, spectrum auction
A mobile network cannot legally operate without spectrum, and spectrum is issued by each national regulator for a fixed term, usually through an auction. That makes it a genuine barrier to entry, and it makes the asset national rather than European.
In the accounts it is a finite lived intangible amortised over the licence term. The cash leaves in a single payment at the auction while the income statement absorbs the cost over many years, so EBITDA is untouched in the year the operator spends most heavily. Anyone reading EBITDA alone in an auction year gets a flattering picture.
It also breaks capital expenditure comparisons. Operators disclose capital expenditure both including and excluding spectrum, and the two are not close, so a capital intensity or operating free cash flow figure means nothing until you know which basis is being used.
The forward question is renewal. A licence expires and has to be bought again at whatever the next auction clears, which is neither known nor controllable, so a forecast that shows no spectrum spending after the current term is understating the capital the business requires to keep operating.
Worked example
An operator pays for a licence in a single auction year and amortises it over the licence term. EBITDA in that year is unaffected, while cash falls by the full amount.
Its capital intensity looks unchanged on a capital expenditure figure stated before spectrum, and far higher on the figure stated after it. Both are published, and only one supports the comparison you are making.