Europe protests pricey 3G auctions

Some of the European businesses that paid a total of $190 billion last summer to buy the spectrum needed to run 3G phone services want their money back.

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
3 min read
Some of the European businesses that paid a total of $190 billion last summer to buy the spectrum needed to run third-generation phone services on the continent want their money back.

It was disclosed Monday that nearly 2,000 European business leaders have quietly signed a petition demanding governments in Germany, the United Kingdom, France, Italy and other European countries return the cash, then sell the spectrum all over again in a cheaper, and fairer, way.

Instead of an auction, which drove the prices up, the governments should decide using applications submitted by companies. In the applications, the companies would spell out their qualifications, according to Declan J. Ganley of GrowthPlus, a European business association and one of the sponsors of the petition.

Nothing less than the economic health of an entire continent is at stake, Ganley said. Most of the spectrum winners are financing the auction fees by going to the capital markets. British Telecom, for example, is undergoing an initial public offering. Other spectrum auction winners have sought the cash on the bond markets.

Third-generation, or 3G, wireless technologies are expected to enable high-speed, always-on Internet connections for a number of devices including mobile phones, handheld computers and laptops within the next few years. Estimates vary as to exactly when 3G systems will be readily available, but most analysts expect the new technology to be well received once it debuts.

While 3G licenses may have skyrocketed in Europe, the available capital for such ventures has not. In fact, Ganley said, the $190 billion the companies need to find is a billion dollars less than the entire pool of equity available in 1999 for all European business.

"That money is dead money. It's not creating jobs. It's not funding the growth of new business," Ganley said. "The Communists, in their worst days, couldn't have dreamt up a tax as (bad) as this. The way this highway robbery has taken place has crippled the industry."

Some industry watchers say that while the European auctions were excessive, the telecom companies may be fighting a lost cause because governments rarely return money that they've already made plans to spend. Plus, the analysts say, the petition could also easily be misinterpreted as whining about why companies had to pay so much money for licenses in Europe, while 3G licenses elsewhere are already dropping in price.

The petition is just the latest sign of unrest over last summer's auctions. Last Monday, members of the European Union (EU) commission demanded a review of how the auctions were held. Some EU leaders are also asking that instead of paying in a lump sum, the spectrum winners be allowed to pay the money using installment plans, like a bank does for loan recipients.

And in a rare admission, the head of British Telecom, Peter Bonfield, said his company spent about $15 billion too much for their licenses.

While the U.S. government made about $17 billion when it auctioned off 3G licenses recently, there are signs of a slowdown.

An upcoming French auction of four licenses has only drawn two bidders. Only three operators have said they'd bid for four 3G licenses in Belgium.

Also on Monday, Australian leaders said companies including a Qualcomm subsidiary called 3G Investments won the rights to spectrum in an auction that garnered only half of the proceeds expected.

3G Investments said its bid of $79 million won the right to administer next-generation service for a potential customer base of 12.3 million people in some of Australia's larger cities.

Other winners announced by the Australian government include Telstra, Cable & Wireless, Hutchinson Telecommunications and Vodaphy Group.