LONDON (CNNfn) - Germany's third-generation mobile phone auction finally ended Thursday, much to the relief of competing rivals, after bidding topped $45.8 billion as Group 3G dug in its heals and refused to throw in the towel.|
Group 3G, which combines Telefónica of Spain with Finland's Sonera, had been widely expected to become the second company to drop out, since it was the only newcomer entering the market. Swisscom's Debitel unit dropped out on Friday in the auction for Universal Mobile Telecommunications Standard (UMTS) licenses, which allow operators to offer fast internet access, video and data feeds via mobile phones.
The bidding -- for 12 blocks of frequency on offer -- topped the money raised in Britain's pioneering UMTS auction in April, which raised a staggering £22.5 billion ($33.75 billion) for five licenses, sending shockwaves through the industry that the high costs could cripple the winners. That sparked a major sell-off in telecom shares.
Germany's mobile phone market is bigger and less mature than the British one, with a larger population of 82 million to Britain's 60 million.
The country's two biggest mobile phone companies -- T-Mobil, a unit of Deutsche Telekom AG (FDTE), and Vodafone Airtouch PLC's Mannesmann Mobilfunk (VOD) -- won two frequency blocks each. They had been expected to win three each.
Other winners include British Telecommunications PLC (BT-A), France Telecom SA (PFTE), and Holland's Royal KPN NV. The Dutch company last month formed a partnership with Hong Kong conglomerate Hutchison Whampoa and Japanese cellular market leader NTT DoCoMo to bid under the name E-Plus Hutchison.
All companies settled for two blocks each, the minimum requirement to gain a license.
"On our estimates, looking at all 15 western European markets, we estimate license fees could be as high as $200 billion," Paul Brilliant, an analyst at Morgan Stanley Dean Witter, told CNNfn. "That, on our estimates, represents 25 percent of the total value of the European mobile sector being transferred from these companies, and ultimately from shareholders to governments."
The astronomical amount raised in Germany and Britain has led many credit agencies to review ratings on the winners in the latest auction, which left shares in British Telecom, Vodafone, Sonera, Telefonica, E-Plus owner KPN Telecom and France Telecom sharply lower.
"Credit ratings are coming down, and in most cases it will be by more than one notch," David Satples, Fitch's senior director of corporate ratings for the European telecoms, media and technology sector, said.
British Telecom, which agreed to pay $6 billion to increase its stake in Viag Intekom, Germany's No.4 mobile phone company, expects the license fee will take "some years to pay back."
"I'm surprised there are six players in the market," Sir Peter Bonfield, chief executive of BT, told CNNfn. "It'll push back when Vaig becomes profitable by another three years."
The auction circus now moves to Italy, where bidders have until August 24 to register their intention to bid the regulator. Italy plans to offer five third-generation licenses in November under a two-step process. The government first will hold a "beauty contest" to determine the quality of the bids, then an auction stage in which bidders will be able to increase their offers.
Dresdner Kleinwort Benson estimates that the Italian licenses are worth 4.5 billion ($4.09 billion) each. Italy is seen as a particularly attractive market for the technology, because about 60 percent of the country's 57 million population already have cellular phones.
France plans to award four new-generation mobile licenses in November, using the beauty-contest approach. The government has already set the price of each license at 32.5 billion French francs ($4.6 billion).