re: Gent and European Spectrum Licensing Overhaul
<< Vodafone has also presented figures showing that when the 3G licence fee is included accounting profitability measures fall significantly. >>
When I saw the comments you posted by Chris Gent, I was just reading about the recent decisions of the French government, and I assume Chris took this occassion to comment as a result of same:
>> France Seen Backing Off On Onerous 3G Payment Structure
Dow Jones Newswires
Jun 01 2001
The Feature
The uncertainty of the future of 3G dictates the terms of the UMTS license today.
The French government Thursday said it will award third-generation mobile telephone licenses to France Telecom (FTE) and SFR, the mobile arm of Vivendi Universal's (V) Cegetel unit, just as the industry regulator said the price for the two remaining licenses should effectively be reduced by spreading out hefty upfront payments over 15 or 20 years.
The regulator's recommendation and the Finance Ministry's decision came as no surprise; France Telecom and SFR had been the only two bidders in last year's auction for four Universal Mobile Telephone System licenses.
Authorite de Regulation des Telecommunications also recommended that the government restructure how the licenses' EUR4.9 billion price is paid. ART Chairman Jean-Michel Hubert said fees should be more evenly spread over the 15-year license period, and recommended that license winners share site and antennae costs
If implemented, the moves could attract operators sitting on the sidelines, including Deutsche Telekom AG (DT), Telefonica SA (TEF) and Bouygues SA (F.BOU), analysts said. All three withdrew from last year's auction at the last minute, citing pricing concerns.
"ART realized, just as the three operators did, that the price, in terms of upfront payments, is too excessive; that it would be difficult to attract bidders for the remaining two licenses," said Emmet Kelly, a telecoms analyst for BNP Paribas. "This is good news for operators."
He said that by stretching out the payment scheme, the government would actually be reducing the cost of the license in present terms.
Lehman Brothers said the proposal would result in a significant impact on net debt for the operators; for France Telecom's mobile unit Orange SA (F.ORA), peak net debt would fall to EUR11.6 billion from EUR13.1 billion at the end of 2003.
"This proposal reduces the upfront license cost to EUR1.25 billion over the next five years, from EUR3 billion previously, while making future payments less onerous," Lehman Brothers said.
Analysts also said some wildcard bidders, such as Hutchison Whampoa Ltd (H.HUW), might throw their hat into the ring.
One operator says license still too expensive
At least one operator is still playing it cool. Deutsche Telekom's T-Mobile International AG (G.TMO) said it still considers the license and related infrastructure costs too expensive, given that it doesn't have an established second-generation network or customer base in the mature French market. However, spokesman Philip Schindera also told Dow Jones Newswires that DT "hasn't said goodbye to France; we will watch what happens in the market."
Neither Telefonica nor Bouygues were available for comment.
While the prospect of a revised licensing payment scheme might generate enthusiasm, the situation's political element can't be ignored, as the government would like to extract as much money for the licenses as quickly as possible, in part to bolster its state pension fund.
"Any decision on the pricing of the licenses will be made after the next presidential election," one analyst at a Dutch bank said.
The next election is scheduled for the second quarter of 2002. Analysts said a revised pricing regime would likely be phased in slowly, or after SFR and France Telecom each pay their respective 2001 installments of EUR1.25 billion.
"After that, you will probably see the annual payments reduced (and extended), which will pave the way for awarding the other licenses," Kelly said.
The regulator recommends winners still pay one quarter of the fee - or the EUR1.25 billion - in the first year of the license's operation but that for the second year and the following four years a nominal fee be paid, similar to that for existing second-generation GSM licenses.
The balance of the EUR4.95 billion would then be paid over the next nine years, when third generation services begin to generate positive cash flow.
ART also said that other terms of the licenses, such as the license duration, could be changed.
Some analysts said this might still be insufficient to some operators, and in particular to France's third largest mobile operator Bouygues Telecom, which didn't bid in the first auction, and has been calling for a lower license price.
"If in a year's time, we still have a EUR5-billion price tag, I can't see why there would be more than two candidates," said Philippe Germond, Chief Executive of SFR.
ART's Hubert said the second auction should be launched in the first half of 2002 at the latest, although the government said it would launch the tender "when the time is right."
There is no urgency to grant new licenses since third generation mobile handsets won't be available before the end of 2002 or 2003.
The European Union's schedule - requiring third-generation services to be launched by Jan. 1, 2002 - was "overly optimistic," and there won't be an "actual" third generation market before the end of 2003 or even 2004, Hubert said. <<
- Eric - |
