|
BT sings Italian blues
|
 |
October 23, 2000: 10:50 a.m. ET
Joint venture Blu quits auction of cell-phone licenses amid shareholder strife
|
LONDON (CNNfn) - British Telecommunications PLC's bid for an Italian third-generation mobile-phone license ended in farce Monday when the company's Italian mobile venture pulled out of a government auction of new permits amid a dispute with its partners about who pays what share of investment costs.
The retreat leaves a hole in BT's plans to construct a Europe-wide network of mobile-phone businesses, and may also hand its rivals the chance to buy  cheaper-than-expected licenses.
The debt-laden British phone company failed to convince its partners in Blu, Italy's smallest mobile-phone operator, that bidding for the 3G license, which would enable Blu to offer email, internet and video services via mobile phones, justified what was expected to be a hefty price.
British Telecom said it offered to give Blu, its Italian mobile phone venture, 500 billion lire ($217 million) to continue with the bidding, but its partners voted against the move. Shareholders in Blu had wanted BT to increase its stake in the venture to 51 percent from 20 percent, to foot a larger proportion of the expected  5 billion ($4.2 billion) cost.
"BT was prepared to raise its stake and take more of the risk but could not take the amount that the other shareholders demanded as the price for continuing the bidding," BT said in a statement.
The pullout left five bidders chasing the five third-generation licenses on offer, but the Communications Ministry could not immediately say whether that meant the auction was over. Blu became the first incumbent mobile-phone operator to fail to win a license for third-generation services in any European country that has yet auctioned the new permits.
The Italian auction has raised only about 12.2 billion to date, around half the amount expected. The German government netted 50.8 billion for six licenses in August, while Britain landed 38 billion for five licenses in April.
BT has been reluctant to take a bigger stake in Blu because of its rising debt burden, which some analysts have predicted will grow to £30 billion ($43 billion) next year. In September, credit rating agency Standard & Poor's cut its rating on all BT debt by four notches, to A from AA+. The company's share price has halved since the beginning of the year.
European expansion
Investors sent BT shares down more than 3 percent on Aug. 17 when it agreed to pay more than $6 billion to increase its stake in Germany's Viag Intercom to 90 percent. The company's moves to spread its reach across Europe were aimed at offsetting a loss of market share in Britain.
 "Strategically, BT's at a disadvantage," said Fanos Hira, an analyst at Bear Stearns. "It's left with the fourth-largest operator in Germany and the second-largest (cell-phone company) in the U.K. They have a minority position in France, where they're probably going to be edged out, they lost the battle for Airtel in Spain, and they've just lost the license in Italy."
"That's not really enough to extract the synergies that their competitors Vodafone and Orange will extract," Hira said.
BT also owns Dutch cell-phone operator Telfort and Ireland's Esat. The company and its joint ventures have so far managed to snap up third-generation mobile phone permits in Britain, Spain, Germany and the Netherlands.
But some analysts said it's too soon to write off BT's strategy, and for that matter Blu, as the Italian venture will continue operating mobile services for the next two to three years.
Deutsche Bank analyst Steve Malcolm said Blu could start talks with the two new entrants into the market and offer to sell them its network of base stations. For a new license holder, that would reduce the effort and cost of building new infrastructure. BT could even continue to offer mobile services by routing them through the network of one of the new operators.
Auction to be re-run?
Italian Prime Minister Giuliano Amato said an inter-ministerial committee would meet Monday afternoon to discuss the results of the mobile-phone license auction. Italian newspaper la Repubblica said Monday that Amato was furious when told of Blu's intention to back out of the sale on Sunday night, and convened an all-night meeting of lawyers.
Sources at the Italian communication ministry told Reuters the government was studying the possibility of calling a fresh auction among the five remaining bidders, reducing the number of licenses on offer from five to four. The source said that for the auction to be declared void, the government would have to prove that Blu had never been a serious contender, and had thus violated the auction rules.
Italian internet company Tiscali, one of the main shareholders of bidding vehicle Andala, said any move by the government to rerun the auction would be "scandalous."
Tiscali CEO Renato Soru told shareholders at a meeting in Cagliari, Italy: "We took part in the auction according to certain rules and with these rules we won."
Any other outcome "would be scandalous because it would mean that in Italy there is no such thing as rules," said Soru.
BT shares edge higher
British Telecom stock rose 9.5 pence, or 1.3 percent, to 724.5 pence, in London Monday afternoon. The prospect of lower-than-expected license expenses sent shares of rival bidders higher. Vodafone Group PLC climbed 2 percent to 281.5 and Telecom Italia Mobile SpA soared 3.4 percent.
In addition to BT with 20 percent, Blu's shareholders are Italian toll-highway operator Autostrade, which has 32 percent, the Benetton family's Edizioni Holdings, broadcaster Mediaset and Distacom, each with 9 percent, while Gruppo Caltagirone, Italgas and Banca Nationale del Lavoro have 7 percent each. Shares in Autostrade fell 2.7 percent.
Six contenders lined up to bid for the five licenses, including Italy's four current cell-phone operators: Blu, TIM, Vodafone-controlled Omnitel, and Wind, a joint venture between Italian electricity utility Enel SpA and France Telecom SA. The two new entrants were Telefónica SA-backed IPSE 2000 and Andala, run by Hong Kong-based telecom conglomerate Hutchison Whampoa Ltd. and Italian Web access provider Tiscali SpA.
Shares in Tiscali jumped 10.6 percent to 39.20. 
--from staff and wire reports
|
|
|
|
|
|
British Telecom
Blu
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
