3G contracts should be going out soon....place your bets.
British Telecom's Greaves on UK Mobile Bid Strategy: Comments
--From AOl.-- Cooters
London, April 27 (Bloomberg) -- The following are comments by Tony Greaves, third-generation mobile director at British Telecommunications Plc, about the company's strategy in bidding for a new U.K. mobile phone license. The U.K.'s second-biggest cellular phone company won license C, one of five 20-year licenses auctioned by the U.K. government, for 4.03 billion pounds ($6.36 billion).
The licenses, known as ``third-generation'' of ``3G'' licenses, will enable wireless devices to download data and video at faster speeds than possible through existing mobile networks.
Why did you opt for license C instead of license B, which has more spectrum capacity?
``The key question there to address is how much more one is prepared to pay for license B because licenses C, D, and E are very, very similar but license B clearly comes with an extra 5 megahertz, it's a 30 meg license as opposed to 25 megs. We did a lot of work on assessing the incremental value of the extra five megahertz. It's determined primarily by cost savings that one could make in the network in the later years of the license. And we assessed that at around 400 million (pounds) and so that was the differential that we would have been content with. ''
Were auction prices a lot higher than you expected?
``I think all of the winners would have been very happy to see significantly lower prices in the auction, but it's well within what we can see on our business case for the opportunity. So we're very content that it's good value for money.''
How did you determine the value of the license?
``The first thing is that third-generation and the mobile Internet is going to throw up a range of opportunities, which are different from those that you get from a conventional 1G or 2G business. In that we certainly foresee a world in which customers have more than one mobile device and third-generation becomes embedded in other devices such as cars or camcorders. And the other thing that's very different is that in the future all of the revenue flows won't necessarily come directly from customers. They may be paid for by m-commerce, or advertising or other sources. So what we took was the view of the overall marketplace that we thought would exist, the overall amount that we could raise, the types of market shares that we might expect and the margins that might exist and we came up with a range of values. This was well within that range.''
How much will it cost to build a new network?
``Estimates for that vary. And it depends on what kind of coverage you want to get to and what kind of network identity you want to build but I think most industry estimates are in the 1.5 to 2 billion (pounds) to roll out a substantial network within the U.K.''
``That will take about two years. I think most people are working on a 2002 launch date.''
When will it break even?
``I don't really want to comment on exactly the details of our business plan. We've got a range of values and a range of breakeven days. I think it's wrong to be too precise because there are clearly a number of uncertainties with 3G.''
Will you pay for it all out of your cash resources or do you expect to find other sources of financing?
``With regards to the license payment, all of the winners have the option to defer 50 percent for years six through 10, but the rate of interest which the government charges is certainly not attractive for us. So we'll be paying up front and we'll be using our existing facilities to do that and to roll out the network.''
Are you considering reaching agreements with any equipment manufacturers to get some upfront payment in return for a contract with them?
``Yeah, we're in pretty advanced discussions with leading equipment vendors on rolling out the U.K. network and we're certainly looking at financing options as part of that. But for a company of BT's size and credit rating, although these are large numbers, it's certainly by no means beyond our resources to finance it internally if we so choose.''
What will BT offer through the new network?
``I think that what you'll see is a proliferation of devices so it will move way beyond the standard mobile handset that we see today. We'll provide a full range of mobile multimedia services, which will be everything from taking what you have on the desktop with you wherever you go -- and that's fast Internet access, fast corporate LAN access -- through to more advanced features. I think we'll see video becoming much more important as both a business and a mass application. We'll see other non-conventional devices become 3G-enabled and offer customers third-generation benefits.'' |
