Experts doubt appeal of mobile phone licences

Telecoms experts warned yesterday that bidders might not emerge for four Irish third generation or 3G mobile phone licences.

Analysts said combined licence fees of £310 million (€393 million) were significantly higher than those charged in other European states. Many questioned whether newcomers to the Irish market would be interested in a fourth licence which would bring more competition.

Also, several of the firms which expressed a formal interest in the licence competition last year have since gone bust. Formus and Meridian Communications, which both responded to a consultation paper, went into liquidation during a major slump in the telecoms industry this year.

Telecoms regulator, Ms Etain Doyle, will announce details of the competition today following a year-long dispute over the issue of fees with the Department of Finance. Ms Doyle has sought lower fees of €40 million-€60 million whereas Finance wanted higher fees of about €100 million.

The parties have agreed a compromise with three licences being sold for €90 million and a fourth licence, with stricter licence conditions, costing €40 million.

The biggest Irish mobile operator, Eircell Vodafone, said yesterday it was "concerned" about the fees. "We question whether there will be four bidders based on these prices," the company said.

Meteor, the third and smallest Irish mobile operator, said it could see no economic case in purchasing a licence at a fee of €90 million. "It would have to be substantially lower than that to attract four bidders," said a spokesman.

Bidders will be asked to pay a per capita fee of €103 for the Irish licences, compared with just €47 agreed in the Greek auction, which was completed in July. It is expected, however, that £120 million of the overall fees will be paid over a number of years to reduce the upfront cost.

The licences, which will enable firms to deliver multimedia services to mobile devices, generated huge interest during the dotcom boom. The UK and German governments netted windfalls of €36 billion and €50.8 billion respectively for their exchequer. However, in recent months the value of licences has fallen dramatically due to technical hitches and doubts over demand for third-generation services.

Several licence competitions recently ended in failure as companies indicated they would not pay huge fees charged by governments. Last month, the French government slashed the price of its third generation mobile licences to €619 million from €4.95 billion.

Mr Harry McDermott, director of Mason Communications, said it was good news that the competition was at last beginning but the price set was high. "It was a different game 12 months ago. It is a question of whether operators want to come into a small market like Ireland," he said. "It is also the cost of building a network. This can increase capital expenditure by two or three fold."

Most analysts predict the two major operators Digifone and Eircell Vodafone will bid for licences at the prices suggested. But several believe Meteor may not have the financial muscle to make a bid.

Two of the international firms that expressed a formal interest in the Irish competition last year were the biggest global operators, Orange and Vivendi Telecom.