German 3G auction: And the winners are...

Except for Swis debitel, all the compeititors in the German auctions have won licences, but the cost has been dramatically high

BT is one of six companies to emerge with a German 3G licence Friday in what is now officially the world's most expensive spectrum auction.

In the auction £28bn was raised with each firm paying around £4.5bn each for their slice of the German 3G market. Alongside the 90 percent BT-owned Viag, the other winners were E-Plus Hutchison (a consortium made up of KPN, NTT and Hutchison), Group 3G (Sonera and Telefonica), Mannesman Multimedia, T-Mobil (the subsidary of Deutsche Telekom) and MobilCom Multimedia (part German and part France Telecom).

It was widely believed that the £22.5bn UK auction price tag would be hard to bet but the German sale outstripped it by 37bn, leading to farther questions over the wisdom of auctioning spectrum to the highest bidder. Other European countries, including France, Norway and Finland have opted instead for a "beauty contest" in which spectrum is allocated to firms on the basis of merit. Experts have criticised the auction system for forcing prices to an artificially high level and leaving companies with little money left to spend on developing services.

The auction finished ahead of expectation as T-Mobil and Mannesmann decided to go after just two blocks of spectrum instead of three. It was also widely predicted that Group 3G would drop out as the price rocketed.

BT also took the decision during the course of the auction to settle for two blocks of spectrum. "Viag took the decision that we didn't need three blocks and that we could provide outstanding service with two blocks, " says a BT spokesman, admitting that the decision was based on "economics".

The telco's latest 3G win will be added to licences it already has in the UK, Netherlands, Spain and Japan and has raised eyebrows about its ever-increasing debt, now predicted to reach nearly £30bn by year-end. BT is expected to off-set its debt with disposals and floating some of its recently spun-off businesses.

The spokesman would not speculate on which divisions would be effected but claimed the high price paid for licenses would not effect the telco's ability to roll out services.

Over twenty billion pounds was bid for the five third generation (3G) mobile phone Wireless Technology licences on offer from the British Government. Go to AnchorDesk UK with Tony Westbrook for the news comment.

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