The auction for 3G mobile phone licences ends Thursday as analysts warn the high price paid could "cripple" operators.
The government has made an extra £22.5bn for its coffers following the hotly contested auction. The total made is around five times higher than analysts predicted. It leaves BT, Orange, One2One and Vodafone with licences to set up services for the next generation of mobile phones -- 3G -- employing UMTS (Universal Mobile Telecommunications Standard) technology.
A new entrant -- Canadian company TIW -- has also secured a licence.
But while the government congratulates itself on a highly profitable exercise, analysts have criticised the auction system for pushing prices too high. Juliet Ward, analyst with research firm Ovum warns that the short term gain by government could actually lead to a long term loss for the telecoms industry. "The auction system means the cost has been forced up and up. From the government's point of view it is a very effective system but for the companies shelling out in the long term there is much more risk," she says.
For the winners, the vast sums paid to provide 3G will either damage the potential services, or force operators to move at unreasonable speed according to Ward. "It is either going to cripple them or make them hungry to get services out. There is going to be great competition to introduce innovative services," she predicts.
Ward's greatest concern however is that of passing the cost of the licences onto unsuspecting consumers. "Inevitably someone has got to pay and some of the cost will be borne by customers," she says.
3G phones will allow users to surf the Internet, download email, access multi-media services at speeds three times faster than GPRS (General Packet Radio Service) technology. Phones based on GPRS are expected this summer.
And the winners are ...
- TIW: wins licence A at a price of £4,384,700,000
- Vodafone: wins the much-coveted licence B for the princely sum of £5,964,000,000
- BT: has to settle for the cheaper licence C, with less bandwidth. Paid £4,030,100,000
- One2One: gets licence D and pays £4,003,600,000
- Orange: pays £4,095,000,000 for licence E
And the losers are....
ntl pulled out Wednesday, joining 3GUK, Crescent, Epsilon, Tel Spectrumco, Telefonica and WorldCom as the also-rans.
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