US wireless auction slow off the blocks

The US wireless auction got off to a slow start this week, pulling in only $501m in the first two rounds, but infrastructure providers hope to share the bonanza that Uncle Sam will miss.

The 422 licences for both 2G and 3G were once tipped to bring in up to $18bn, double the sum of the last auction in 1996. But this year, facing pressure from the banks and the worldwide difficulties of raising cash, the telcos are being more cautious. Eric Kintz, associate partner at consultants Roland Berger, said: "They are not going to go too far because they are aware that financial markets will downgrade them." Top bidder was Verizon Wireless, a joint venture between Vodafone and Verizon Communications, which put up a total of $131m, including $25.5m for licences in Los Angeles. Mobile use is booming in the US, with 107 million customers and the prediction of 150 million within two years, but users are complaining of dropped calls and network busy signals. The new spectra should help capacity and give the ability to roll out 3G. Mike Hill, general manager of IBM Global Communications, said: "Getting the spectra for 2G and 3G is critical. Asia and Europe have almost doubled the proclivity to use wireless as the US and we could fall behind. But it's going to cost a lot of money to build the infrastructure and it's a challenging business model." IBM stands ready to roll out the applications and software infrastructure for ebusiness on the net, including portals and platforms. Analysts expect the auction to be complete by mid-January.