MOBILE LICENCES: Meteor may choose not to bid for a third generation (3G) mobile phone licence due to the high cost of acquiring a licence and building a national network.
Senior management from the firm's majority shareholder Western Wireless will meet in Dublin this weekend to make a final decision on the bid.
Telecoms analysts warned yesterday that a decision by Meteor to withdraw from the process would make it difficult for the Government to find bidders for all four 3G licences on offer because of the downturn in the sector. This could cost the Exchequer more than €50 million depending on the type of licences that other firms make bids for and the number of firms that decide to compete.
Digifone and Vodafone Ireland are both expected to make bids for the licences, which will enable the companies to offer high-speed internet services and video to a range of mobile devices. There is also speculation that Orange or the Hong Kong conglomerate, Hutchison Whampoa may bid to extend their UK 3G networks.
ESB, which was at one stage considering entering the 3G process, will not now bid, although it may seek to team up with a successful foreign bidder to provide mast infrastructure and fibre. Other firms such as Tele2 and the Denis O'Brien-backed firm Level 62 have also expressed an interest but are now believed to have withdrawn from the bid process.
A spokesman for Meteor said the company was working on a bid and part of that work was continuously evaluating whether to submit it. "A final decision will be made after the weekend and closer to the date," he added.
Meteor is the third mobile phone firm in the Irish market and has been operating for about a year. It has faced a difficult first 12 months due to the high penetration levels in the Irish market and the strength of both incumbent firms, Vodafone and Digifone.
Meteor has about 3 per cent market share and is still struggling to build a national network following lengthy delays in the award of its GSM licence due to a legal challenge by Orange. Western Wireless is also facing a difficult period due to increasing competition in the US market and the downturn in the industry.
Mr Ultan Ryan, principal telecoms consultant with Mason Communications, said he would be surprised if Meteor submitted a bid. "I cannot see why they would want a 3G licence. They have yet to start 2.5G, they have major coverage demands in 2G and, while they have made a credible start with 3 per cent of the market, they still have a long way to go to make an operating profit, not to mention getting a return on their 2G investment," he said.
Mr Ryan said he could only see justification for an investment in 3G by the incumbent operators Vodafone and Digifone. "From my own calculations, I estimate an operator would have to have a minimum of 30 per cent of the market to justify the investment," he said.
Senior industry sources said they expected firms would submit bids that just met the criteria set down by the telecoms regulator in terms of coverage and speed of roll out. Some firms may even submit bids that do not meet these criteria because they feel it would be uneconomic to meet them.
The sentiment towards 3G investments has soured considerably since 3G licence competitions across Europe raised billions in licence fees for governments during 2000. Recently mobile firms in Italy and Norway have either gone out of business or given back their 3G licences.
A combination of technical problems, cash shortage and increasing competition for 3G from competing technologies, such as local area networks, is causing firms to seek more realistic valuations for licences. This is reflected in the Republic, where the Department for Finance initially had sought £600 million for four licences. After a year long dispute with the regulator, Ms Etain Doyle, most observers believe the Government will be lucky to net the revised €393 million total for the four licences now on offer.
