The directors present the strategic report for the year ended 31 December 2023.
STRATEGY
Digital Mobile Spectrum Limited (DMSL) is jointly owned by the UK mobile network operators (MNOs) EE Ltd., Hutchison 3G UK Ltd., Telefonica UK Ltd., and Vodafone Ltd. The company’s purpose is to support these mobile operators’ shared objectives with respect to: mitigating any impact their networks may have on the reception of digital terrestrial television; the delivery and coordination of work to deliver the Shared Rural Network (SRN) and; any other programmes its shareholders may from time to time unanimously agree should form part of its purpose.
The company’s strategy to meet its purpose is threefold. To be a strategic partner to its shareholders; to be the best company to work for and; to connect people to the communications and media networks they wish to access. In delivering its purpose on behalf of shareholders, the company expects its people to demonstrate its core values of collaboration, integrity, respect, commitment, leadership and empathy.
OBJECTIVES
DMSL’s objectives are divided into three areas: to remain robust and sustainable; to support spectrum licence obligations to minimise disruption to terrestrial television; and to support the delivery of SRN.
To assess the extent to which the company is meeting its aim of remaining robust and sustainable the company tracks: its financial health, whether it is facilitating a positive and supportive working environment, and how effectively it implements efficiency and productivity improvements. In addition, the company considers any additional programmes of work that will not increase the risk of meeting its purpose, but are likely to reduce the cost of delivering programmes on behalf of its shareholders.
DMSL mitigates the risk to each mobile operator of failing to fulfil the obligation in its spectrum licence not to cause undue interference to neighbouring spectrum users. DMSL ensures the mobile operators are able to activate new mobile sites without requests from the regulator to deactivate or slow rollout due to interference with terrestrial TV services. DMSL achieves this by providing a clear programme of communication and support for viewers who see disruption to TV attributable to mobile sites. In 2023 this work involved mitigating any issues caused by new and existing sites operating in the 800 and 700 MHz spectrum bands that were previously used for terrestrial television.
For its work on SRN, DMSL’s key objective is to ensure operators fulfil their spectrum licence coverage obligations to deliver coverage from Total Not Spot (TNS) sites. DMSL provides programme governance, management and coordination for the TNS element of the shared rural network. It also supports MNOs with the delivery of coverage from Extended Area Service (EAS) sites built by the Home Office.
BUSINESS MODEL
DMSL has an overarching administrative and management team and two programme delivery units: one for its TV support work, known as Restore TV, and one for SRN. It adds value by delivering services jointly to all of its shareholders that each would otherwise have to source independently. This allows the shareholders to focus on their core business as competing mobile operators, while certain shared regulatory obligations are delivered in an equitable manner, with identical risk, through DMSL as a single entity.
Budgets for Restore TV and SRN are prepared and agreed with its shareholders. DMSL maintains an appropriate cash balance for its ongoing operation and invoices shareholders for services in advance through the year.
In 2021, DMSL was asked to support the restoration of TV services in the North East of England following a fire at the Bilsdale transmitter. DMSL continued to deliver support for this programme for some of 2023. This programme of TV support is funded by UK’s provider of digital terrestrial television.
In 2022, DMSL was asked by the BBC to support the transition of certain TV services from standard definition to an all high definition broadcast medium, through 2023. This programme of TV support is funded by the BBC.
Both these programmes of work align with DMSL’s goal of connecting people to the networks they wish to access, enhance relationships between DMSL, Government, Ofcom and broadcasters, and reduce the cost of delivering other work on behalf of its shareholders.
BUSINESS ENVIRONMENT
TRENDS AND FACTORS
DMSL provides services to the UK mobile operators. The UK market for mobile services is mature and highly competitive. The UK government has a significant focus on ‘levelling up’ across the country, as well as on digital connectivity and innovation. Programmes such as SRN, form a part of this focus. Further efficiencies for DMSL may be achieved through the facilitation of collaboration on future connectivity, telecoms policy, technology transitions and regulatory priorities in the UK market.
PRINCIPAL RISKS AND UNCERTAINTIES
DMSL maintains a comprehensive risk register outlining strategic risks as well as steps taken to mitigate those risks. Risks DMSL faces during the next 12 months include:
Sensitive information exposed in the public domain;
Failure of key suppliers for the delivery of existing work;
Loss of key people and relationships with insight into programme delivery progress;
A change of government seeking to modify the delivery of key programmes.
FINANCIAL RISK MANAGEMENT OBJECTIVES
The company does not utilise complex financial instruments and is not exposed to foreign exchange risk. The company's financial instruments at the statement of financial position date primarily comprised cash and liquid resources. The main purpose of these financial instruments is to provide finance for its operations. The company has various other financial instruments such as trade debtors and trade creditors that arise directly from its operations. The fair value of financial instruments is not materially different from their carrying value.
CREDIT RISK AND CASH FLOW RISK
The company had no borrowings at the period end. The company's strong cash position acts as a natural hedge against any credit risk. The company's objective is to retain a balance between continuity of funding and the flexible use of available cash reserves.
LIQUIDITY RISK
DMSL’s viability as a going concern relies on the continued financial support of its shareholders to fund the programmes it operates on their behalf. These programmes can be considered separately.
The company’s shareholders’ agreement; and legal obligations related to SRN require DMSL’s shareholders to fund the company to fulfil its SRN obligations until at least 2040. As part of its annual budget cycle and regular business forecasts, DMSL agrees its cash requirements with its shareholders to ensure the ongoing delivery of the SRN programme.
DMSL has service agreements in place with its shareholders to ensure the continued funding of mitigation support until mid-2026.
BUSINESS PERFORMANCE IN 2023
DMSL met the majority of its key performance targets agreed for 2023. These targets fell into three categories: its overall business administration, the restoration of TV services and the Shared Rural Network. The key outcomes are summarised below.
For 2023, DMSL agreed a budget of £10.6m but actual expenditure for 2023 was lower at £9.4m, split between £3.4m cost of sales and £6.0m administrative expenses. The profit before taxation decreased slightly from £1.1m in 2022 to £1.03m in 2023. The company continues to maintain a strong balance sheet with total assets of £7.2m of which cash represents £6.5m.
For 2023, the company reported an employee net promoter score of +58 (on a scale of -100 to +100), based on the extent to which team members would recommend DMSL as a place to work, an 8 point increase compared to 2022. In June 2023, DMSL was shortlisted in the CIPD People Management Awards in the Best flexible working initiative category. New processes, enabling existing programmes to run and report more efficiently, delivered their identified benefits within agreed timelines.
For the mitigation programmes, MNOs were able to activate sites without any requests from the regulator to deactivate or slow rollout as a result of undue interference on terrestrial television. Out of a representative sample of viewers who received support from DMSL, 98.7% rated its service as 8, 9 or 10 on a 10-point scale, 10 being outstanding or faultless.
For the Shared Rural Network programme, procurement continued in 2023, as well as the commencement of planning permission for some TNS Sites. The first Emergency Services Network site went live offering 4G connectivity from all four MNOs. An end of year Programme Stakeholder Survey (all MNOs, Home Office, BDUK/DCMS and Ofcom) showed that all parties were satisfied that DMSL was carrying out its responsibilities effectively.
SUSTAINABILITY
In 2023 DMSL signed up to the SME Climate Commitment, which is a public promise to:
• Halve its greenhouse gas emissions before 2030
• Achieve net zero emissions before 2050
• Disclose its progress on a yearly basis
The company measures emissions annually to support employees in reducing their energy usage and identify areas where energy offset may be required.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 10.
The directors do not recommend payment of a final payment for the year ended 31 December 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
There were no events after the reporting date that would have a material effect on the financial statements. However, the directors wish to acknowledge the contribution of Karl Liriano to the company since 2015. Karl died in February 2024 as this report was being prepared.
The directors have a reasonable expectation that the company will have sufficient funds to continue to meet its liabilities as they fall due for the foreseeable future and therefore have prepared the financial statements on a going concern basis. Further details are given in Note 1.2 of the financial statements.
Blick Rothenberg Audit LLP was appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
We have audited the financial statements of Digital Mobile Spectrum Limited (“the company”) for the year ended 31 December 2023 which comprise the Statement of Comprehensive Income, Statement of Financial Position, Statement and Changes in Equity, Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental and health and safety legislation;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
reviewed the nominal ledger and tested a sample of journal entries to identify unusual transactions; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HM Revenue and Customs, relevant regulators, and the company’s legal advisors
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
Digital Mobile Spectrum Limited is a private company limited by shares incorporated in England and Wales. The registered office is Digital Mobile Spectrum Limited, 24/25 The Shard, 32 London Bridge Street, London, United Kingdom, SE1 9SG. The company's principal activities and nature of its operations are disclosed in the directors' report.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
Short lease assets, such as IT equipment, are written off in the year of acquisition.
Filters have a limited re-sale value and are therefore expensed on purchase. In the event that unused filters are sold the income will be accounted for in accordance with the revenue recognition policy and brought into account at the point of sale.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
Other financial liabilities, including trade payables and other short-term monetary liabilities, are initially measured at transaction price net of costs directly attributable to the issuance of the financial liability. They are subsequently measured at amortised cost using the effective interest method. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.
Financial liabilities are derecognised when, and only when, the company’s obligations are discharged, cancelled, or they expire.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
Equity comprises the following:
"Share capital" represents the nominal value of equity shares.
"Retained earnings" include all current year and prior year results as disclosed in the statement of profit or loss.
The tax expense represents the sum of the tax currently payable.
The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to the statement of profit or loss in the period to which they relate.
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
Leases of low-value assets; and
Leases with a duration of twelve months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the company's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
Amounts expected to be payable under any residual value guarantee;
The exercise price of any purchase option granted in favour of the company if it is reasonable certain to assess that option;
Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
Lease payments made at or before commencement of the lease;
Initial direct costs incurred; and
The amount of any provision recognised where the company is contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease.
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the company.
Management anticipates that all of the pronouncements will be adopted in the company's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the company's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the company's financial statements.
There are no relevant Standards or amendments issued by the IASB that are effective for an annual period that begins on or after 1 January 2023.
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective for periods beginning subsequent to 31 December 2023, which the company has decided not to adopt early. There are no significant amendments which require disclosing.
Effective for annual periods commencing on or after 1 January 2024
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate of Joint Venture.
Amendments to IAS 1: Classification of Liabilities as Current or Non-Current, and Non-current Liabilities with Covenants.
Amendments to IAS 7 and IFRS 7: Supplier Finance and Arrangements.
Amendments to IFRS 16: Lease Liability in a Sale and Leaseback.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
There are no estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities.
Balances arising from contracts with customers are disclosed in note 21.
The average monthly number of employees employed by the company during the year was:
Their aggregate remuneration comprised:
Property, plant and equipment includes right-of-use assets, as follows:
Digital Mobile Spectrum Limited entered into a lease contract with The Office Group, to use an office in the Shard for 12 months until December 2024.
The total costs charged to income in respect of defined contribution plans is £405,536 (2022 - £364,940). There were no amounts outstanding at year end (2022: Nil).
The company uses various financial instruments which comprise cash balances, trade and other receivables and trade and other payables which arise directly from its operations.
The company's principal financial assets are cash and trade and other receivables. The main risk arising from the company's financial instruments is credit and liquidity risk.
The company's exposure to credit risk is limited to the carrying amount of financial assets recognised at the statement of financial position date, as summarised below:
Trade payables liquidity risk is managed by ensuring sufficient funds are available to meet amounts falling due. The company's financial liabilities are summarised below and are all due within one year.
At 31 December 2023, the company had a £15,000 (2022: £15,000) credit card facility.
No amounts were outstanding at 31 December 2023 (2022: £nil).
There are no key management personnel other than the directors. Their remuneration is disclosed in note 7.