Regulator set to award 3G licences

Telecoms regulator Ms Etain Doyle, will award the so-called third generation licences (3G) tomorrow netting up to €280 million for the Exchequer.

The Minister for Communications, Marine and Natural Resources, Mr Ahern, has given written consent to provide for the licensing of 3G mobile telephony services. The Government received only three bids for the four licences available. Vodafone, O2 and the Hong Kong-based Hutchison Whampoa, have applied but Meteor, the Republic's third mobile operator, did not.

The Government will be disappointed not to have raised a further €114.3 million and will have to consider carefully how it can be made attractive to another bidder in the future.

The licences are required by operators of this technology under the Wireless Telegraphy Act 1926. A competition was launched by the Director of Telecommunications in December 2001.

Vodafone, O2 and Hutchison Whampoa, could either bid for an A licence or one of three B licences. The A licence provides for 80 per cent population coverage and potentially extra spectrum to cover mobile virtual network operator services. The B licence provides for a minimum coverage of over 50 per cent. Licence fees were approved by the Minister for Finance, Mr McCreevy, and licencees must pay $50.7 million for the A licence and $114.3 million for each B licence.

Additional access fees will be payable for extra GSM spectrum that may be granted in the future as well as annual spectrum charges for the 3G and GSM frequencies.

The Government has been criticised for failing to capitalise on the deregulation and privatisation of the telecoms industry and there have been calls for a review of the licensing process.

Because a fourth bidder did not emerge the Government's target to raise €394 million in fees will not be met. In Europe, where licences were issued over the past two years, some €120 billion was raised, while in Britain, the Chancellor of the Exchequer's coffers were swelled by £22.4 billion.

The Irish Exchequer has already lost potentially millions of euros in the issuing of second-generation (2G) licences. Limited interest from Europe's telecoms groups is largely due to their huge debt burden as a result of the high cost of licences in those markets and plummeting stock market valuations. Ms Doyle will decide which of the three has submitted the best technical bid for the single A licence. Whoever wins this must spend huge sums of money rolling out networks and successfully marketing 3G services to consumers.

In France, the regulator had to cut licence prices when just two firms agreed to enter its 3G contest. And recently Italian mobile operator Blu was forced to hand back a licence in Italy.

There is also a great deal of uncertainty for the bidders about the capability of this technology, which is still largely unproven. Most analysts suggest the technology will not be offered to consumers in Europe until late 2004 and possibly 2005 as interim technologies such as general packet radio service (GPRS) have failed to excite consumers.