(story to be published in tomorrow's issue, April 4)
Bidding in the UK's auction of next generation mobile phone licences soared through the $16bn (L10bn) barrier on Friday as 13 companies from Britain, the US and around the world continued to battle for the five franchises on offer. The auction, the first of its kind, is being watched closely by other countries. The funds it will raise - more than three times what the government had expected - could convince other countries that radio spectrum is much more valuable than they had thought. Denmark, France, Italy, Spain and Sweden intend to hold "beauty contests" rather than auctions to award next generation licences. The radio spectrum being actioned will be used to provide advanced, or third generation, mobile services, including mobile internet, shopping, banking and corporate services to be introduced in about 2002. The auction involves five rounds of bidding for each licence every working day. The bidders believe that the licences will enable them to profit from huge demand for the new services. Some analysts have estimated the value of the biggest licences at L5bn. When bidding was suspended on Friday after four weeks and 91 rounds, Vodafone AirTouch of the UK, the world's largest mobile operator, led the way with an offer of L2.23bn. It has been consistently making the pace in bidding for licence B, the largest open to any competitor. Friday also saw the first crack appear in the united front shown by the bidders after Crescent, a US group, opted out of the last round of bidding, sparking speculation it may be preparing to withdraw. SpectrumCo, a consortium including Sonera, the Finnish operator, and Virgin Group, led the bidding for licence A, open only to new entrants with L2.23bn. Bidding for the smaller C,D and E licences was led by WorldCom of the US, TelefA3nica of Spain and NTL Mobile, a joint venture between NTL of the US and France Telecom, with offers of L1.88bn, L1.89bn and L1.95bn respectively. Industry analysts said the amounts that would have to be paid could damage the UK's burgeoning mobile phone business by draining resources otherwise spent on building networks. Justinian Clifford-Bowles of Commerzbank said the bidding was "outright disconcerting. We believe the bidders are climbing a wall of fear about not getting a licence." But James Vaux, a director of N.M.Rothschild, the merchant bank advising the government, said the bidders had gone into the auction with their eyes open: "These are large and sophisticated companies and they, rather than the government, are best placed to decide what they can afford and the value of the spectrum". The total which will be raised for the Treasury now exceeds any privatisation of government assets. The previous record was the sale of the fourth tranche of British Petroleum which raised $11.8bn in 1987. Speculation is already rife over the possibilities the unexpected windfall offers the government. L10bn, for example, would fund all the plans to upgrade the rail network over the next five years or the government's hoped-for investment to improve London Underground for the next 15 years - both with L2bn change for a handful of major road improvement projects or bypasses. From analysis of the Red Book accompanying the Budget, it is understood that the government expected to receive only some L3bn from the auction. Reuters
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