Telecoms lifted by EU call for action on 3G debt
By Deborah Hargreaves and Daniel Dombey in Brussels
Published: March 19 2001 19:05GMT | Last Updated: March 20 2001 13:16GMT
Shares in Europe's leading telecoms operators have been given a boost ahead of the expected announcement by the European Commission that it wants EU governments to take action to deal with the high debt levels in the telecoms sector.
In a discussion paper to be released on Tuesday, the Commission will outline options for improving the business conditions in the sector to avoid delaying the introduction of universal mobile telephone systems (UMTS).
It wants EU member states to consider deferring payments for third-generation mobile licences or to allow operators to share infrastructure.
The telecoms sector was lifted by the news with shares in Deutsche Telekom, France Telecom, Vodafone and British Telecom all gaining about 3 per cent in early trading on Tuesday. Shares in Orange, Telecom Italia and Telefonica also rose, gaining about 2 per cent.
The European telecoms industry has already invested E140bn ($126bn) in buying UMTS licences across the EU, pushing up debt to equity ratios at big operators such as BT, Deutsche Telekom and France Telecom close to 50 per cent.
Paavo Lipponen, Finnish prime minister, suggested last week the cost of UMTS licences could affect the EU's competitiveness with the US. He said Finland, the world leader in mobile phone use, wanted a study to see whether "there could be reasons to try to co-ordinate policy and possibly harmonise licensing methods at a European level". But other countries could be reluctant to let Brussels intervene in a national issue.
The Commission's paper is to be discussed by EU leaders at the Stockholm summit this week. Brussels will then meet operators, national regulators and equipment suppliers to try to form some policy recommendations.
Most countries have already awarded the licences for third generation mobile services. Ireland, Portugal and Greece still have to award their licences and France and Belgium have to complete the allocation of all their licences after some bidders dropped out of the auctions this year.
Brussels believes that if governments could find a way to allow operators to share the infrastructure for UMTS, which will allow subscribers to access the internet on their mobile phones, the industry could save 30 to 40 per cent of the capital costs. But this would have to be done in a way that allows competition to develop. Sweden is looking at an open network system that could be used as a model.
The Commission also wants discussion about whether payment for licences could be more in line with operators' cashflow. In the UK, companies have made down payments for licences with the rest to come in instalments, but other countries have demanded the full payment upfront.
The drop in the share prices for most telecoms operators has led to the delays in rolling out UMTS systems.
Brussels will also ask, in its paper, whether there should be some flexibility over the date for operators' licences to be effective - either from the date investment begins or even when the network becomes operational. The Commission also wants discussion about whether third generation mobile systems could focus initially on the most profitable regions. |
