FRANKFURT (Reuters) - Germany raised 6.55 billion euros ($7.4 billion) from its 5G mobile spectrum auction, the Federal Network Regulator (BNetzA) said on Wednesday after a near three-month battle that will see a fourth operator enter the market.

FILE PHOTO: An employee of Germany's Federal Network Agency (Bundesnetzagentur) uses his mobile phone in front of a screen set up for the auction of spectrum for 5G services at the Bundesnetzagentur headquarters in Mainz, Germany, March 18, 2019. REUTERS/Kai Pfaffenbach

The sum pledged in a record 497 rounds of bidding for the 41 blocks on offer was more than analysts had expected, while operators complained that the price they were paying would sap their ability to invest in next-generation networks.

“The auction leaves a bitter aftertaste,” said Deutsche Telekom’s Germany chief Dirk Woessner. The market leader bid 2.17 billion euros for 130 Megahertz of the 420 MHz of spectrum being allocated in the 2 Gigahertz and 3.6 GHz bands.

“The result is a dampener on our network buildout. Spectrum, again, is much more expensive in Germany than elsewhere,” added Woessner.

Deutsche Telekom’s Austrian unit recently bagged 5G spectrum far more cheaply.

The end of the auction fires the starting gun to upgrade networks to run connected factories or ‘smart’ cities in Europe’s largest economy, which is lagging countries like the United States, Japan and Korea that are already starting to roll out 5G services.

On Thursday, shares of new entrant 1&1 Drillisch were indicated to rise 11 percent, while Deutsche Telekom was seen down 0.2 percent.

Vodafone’s Germany CEO Hannes Ametsreiter described the results of the auction as “catastrophic”.

“I’m very unhappy about how long the process took and the high price that we as bidders must pay,” he told the Westdeutsche Allgemeine Zeitung. “Germany is losing valuable time in the digital stakes. In Europe, we won’t be among the first to launch 5G services.”

Vodafone also won 130 MHz, paying 1.88 billion euros, while Telefonica Deutschland secured 90 MHz for 1.42 billion euros.

Telefonica bid less aggressively because it has a reserve of spectrum adjacent to the 2GHz band suited to bolstering its existing rural 4G coverage. The 3.6 GHz band has greater data capacity but shorter range, making it more useful for industrial and urban 5G uses.

“We’ve acquired a valuable package of frequencies that ideally complements our existing spectrum,” said CEO Markus Haas. Telefonica Deutschland confirmed its financial guidance.

FOURTH PLAYER

1&1 Drillisch, until now a ‘virtual’ mobile player controlled by United Internet, paid 1.07 billion euros for 70 MHz, bringing billionaire CEO Ralf Dommermuth closer to his dream of running Germany’s fourth operator.

Drillisch, which also has the right to rent some Telefonica capacity through 2025, said it had “laid the foundation for a successful and permanent” position as Germany’s fourth operator.

In the end, the auction raised more than the 5.1 billion euros from 2015’s 4G spectrum auction, but far less than the 50 billion euros forked out by bidders in a ruinous auction in 2000.

The 5G contest started briskly on March 19 but soon slowed to a crawl as participants gamed a design that allowed incremental bids of just 2 million euros.

That dynamic was only broken last week after BNetzA raised the minimum allowable bid more than sixfold, a step that helped bring matters to a close.