German 3G to raise less
By Ralph Atkins in Berlin and Dan Roberts in London
Published: July 18 2000 18:44GMT | Last Updated: July 18 2000 19:12GMT
The bill paid by telecoms groups battling for Germany's third-generation mobile licences this month will fall significantly short of the £22.5bn ($33.5bn) raised in the UK, according to Germany's telecoms regulatory chief.
Klaus-Dieter Scheurle, the president of the Bonn-based post and telecoms regulatory authority, said in an interview with the Financial Times that, with the numbers of bidders down to seven from an original 12, costs would not reach "dangerous levels".
Although stopping short of saying that the UK bidders had paid too much, Mr Scheurle added that, in Germany, "I expect the cost of a licence will be lower than in the UK". Expectations of how much will be raised by the German government have fallen sharply as potential operators have opted to form alliances rather than bid against each other.
Germany is auctioning 12 frequency blocks, which are expected to be divided between four to six bidders. The UK auction in March for five licences led to criticism in the industry that telecoms companies were being forced to pay too much to develop Universal Mobile Telecommunication System (UMTS) services with video and internet capabilities.
The latest bidder to pull out of the running in Germany was E-Plus, a subsidiary of KPN, the Dutch telecoms group. KPN is instead teaming up with NTT DoCoMo of Japan and Hong Kong's Hutchison Whampoa.
However, Mr Scheurle ruled out changing the rules for next month's auctions in order to boost the revenues accruing to the Berlin federal finance ministry. Before the recent withdrawals, analysts had suggested that the German auction could raise DM120bn, (E62bn, $57bn), although Hans Eichel, the finance minister, has assumed only DM20bn in his budget plans.
Changes had been mooted in Berlin but Mr Scheurle said: "We haven't changed a comma." Bidders had to have "security about what will happen". Mr Scheurle said there would "definitely" be no changes made to bidding arrangements before the auction starts on July 31.
Mr Scheurle said it was the regulatory authority that decided the rules but "my impression is that there is common sense in the government". He added: "The bidding process is not a process to get a lot of new money but to issue new frequencies." The sums raised were "an interesting issue" but more important was the creation of a competitive third-generation mobile market in Germany.
The seven competitors remaining, which included Deutsche Telekom's mobile subsidiary and the Mannesmann mobile operation of Vodafone AirTouch of the UK, were "the hottest bidders", Mr Scheurle said, adding that he was confident that there would be real competition.
Mr Scheurle said he had little hesitation in agreeing the KPN, Hutchison Whampoa and NTT DoCoMo link-up, despite its cost-cutting appearance. "It is not forbidden for companies to try to reduce costs," he said.
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