UK: UMTS PHONE COST CONCERNS LOOK OVERDONE-LEHMAN BROS.
7 Jul 2000 12:10GMT
LONDON, July 7 (Reuters) - An expected link-up between KPN, Japan's NTT DoCoMo and Hong Kong's Hutchison Whampoa could lead to a 50 percent cut in Dutch and German UMTS licence fees, Lehman Brothers said on Friday.
Noting that initial third-generation mobile licence fee estimates looked too pessimistic as the pool of auction bidders consolidates, the broker said lower fees could raise KPN's share price by at least nine percent and lift those of Vodafone AirTouch, British Telecommunications and Deutsche Telekom by two to four percent.
"With a more favourable outcome to the important Dutch and Germany UMTS processes now seeming likely, we would be buying KPN and the pureplay mobile stocks aggressively at these depressed levels," the broker said.
Lehmans had expected the cheapest of five Dutch UMTS licences currently being auctioned to fetch 1.25 billion euros ($1.19 billion), while in a German UMTS auction at the end of the month licences were expected to cost around 12 billion.
But given market sensitivity to UMTS licence fees, the positive sentiment from less aggressive auctions could be "significantly more positive" for the stocks - and the industry, the broker noted.
Despite a rally last month, telecom shares remain around 30 percent below their March levels when a global sell-off was triggered partly by the high prices fetched in Britain in Europe's first UMTS auction.
"If Hutchison do pull out of the Netherlands and Germany, the new entrant bidders in these markets will be far fewer than the seven that began in the UK," the broker said.
"Hutchison's exit would be the most significant development as they turned out to be the most aggressive bidder in the UK, paying seven billion euros (for a UMTS licence)."
Industry sources have said KPN, its Japanese partner NTT DoCoMo and Hutchison are likely to unveil a joint venture early next week to bid for joint UMTS licences in Europe.
Hutchison has already pulled its bid vehicle Hutchison 3G Netherlands out of the Dutch UMTS auction in which KPN is also bidding. KPN's mobile business E-Plus is also bidding in an auction in Germany - and Hutchison is expected to abandon a rival bid via its Auditorium Investments Germany vehicle.
Britain's UMTS auction raised over seven times initial forecasts and tiggered concerns that the industry may face a 170 billion euros bill if other European states awarded licences on the basis of pricey auctions rather than beauty contests.
But in an attempt to secure their future success, which analysts say hinges on upgraded UMTS networks expected to raise fat new revenue streams from high speed mobile Internet and data services, companies have joined forces to help shoulder costs.
As alliance strategies eliminate the number of potential bidders, analysts now believe the price tag for European UMTS licences could be far lower.
Bear Stearns estimates that European states now may raise just 84 billion euros from UMTS. ($1=.6629 Pound) ($1=1.051 Euro).
(C) Reuters Limited 2000. |
