Mobile phone licence scramble about to get started

Telecoms regulator Ms Etain Doyle will announce details of the much delayed competition for new mobile phone licences tomorrow. The competition should deliver a £190 million (€241 million) windfall for the Exchequer next year, with another £120 million over subsequent years. Although small compared with the prices paid for third generation or 3G licences elsewhere in Europe, it will more than double the small Exchequer surplus being targeted by the Minister for Finance next year.

Mr McCreevy's Budget day juggling will give him a surplus of €170 million next year. The 3G licence fees - not included in the Budget - will take that to just over €410 million.

The competition launch follows a breakthrough in the long-running dispute between Ms Doyle and the Department of Finance on how the licences should be allocated. The decision to charge £90 million for each of three licences looks like a defeat for the Department, which sought to maximise revenue from the process. Sources close to the regulator's office said yesterday the details of what has been agreed - including staged payments - will come even closer to what Ms Doyle had sought.

She has been less concerned with raising revenue than ensuring the licence winners could invest sufficiently in their new networks. She had wanted the licence fees set at £50-£80 million. The Department had originally wanted licence fees of about £150 million each. The 18-month stand-off between Ms Doyle and the Department means Ireland will still miss the January 2002 EU deadline for awarding licences. Although the competition will begin this week, the process will not be completed until well into next year.

The licences will be for mobile phone networks that can offer high-speed internet services on a range of devices, including mobile phones. Four licences will be available of which three will be aimed at the existing holders of the digital mobile phone licences - Vodafone-Eircell, Meteor and Digifone, which is owned by British Telecom. The three so-called B licences will cost £90 million, paid in stages, with £50 million paid up-front and the remainder over three years. The holders of the B licences will be required to offer the service only in the larger urban areas. The holder of the A licence will have to pay only £40 million, but will be required to build a nationwide network.

The huge prices paid for 3G licences in other European countries have left winners without the resources to build their networks. The British government raised £22 billion sterling (€35 million)through the auction of licences at the height of the telecoms boom in late 1999 and early 2000. France, which has a similar sized market, has had to restructure its competition, which is currently under way, to encourage more bidders. The cost of the licence has been cut to €619 million from €4.95 billion.