3g Mobile War 2003 - 2023

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Michelle Greenfield        Page         4/28/2007                                                                         

3G MOBILE WAR 2003 - 2023

THE BATTLE:  WINNERS AND LOSERS!

The UK is the first European country to auction off its “3G spectrum”. The UK government auctioned off five licences to create the networks and to operate the enhanced mobile phone services.  Billions of dollars more than expected for the UK and German governments, were raised, earlier this year.  Thirteen bidders had driven up prices well beyond the original estimate of a total auction value of £5bn.  The money may not all be forthcoming at once as the licence winners have the option of paying in instalments over the 20-year licence period, with half paid up front.

Winning Bids after 150 rounds:

Licence A:        TIW                £4.384bn

Licence B:        Vodaphone        £5.964bn

Licence C:        BT                £4.030bn

Licence D:        One2One        £4.003bn

Licence E:        Orange                £4.095bn

Combined value of leading bids:        £22.47bn

                

The Prize

The next generation of mobile phones will make the wireless Internet a reality for the UK.  Phones, watches and other handheld devices will be powerful enough to show video on demand.

Experts say that within a couple of years, more people will be connecting to the Internet on the move than via a bulky personal computer.

TELECOMS SECTOR STARVED OF CASH

Investors and banks are becoming increasingly aware about their exposure to telecoms firms.  Their fears have been fuelled by a steady flow of bad news from the sector and a warning from the UK financial regulator.  The Financial Services Authority (FSA) is writing to chief executives of banks, warning against lending money to the telecoms sector.  The warning came amidst concern that the banks are over-exposed to the sector.

Telecoms firms worldwide have long been borrowing money from anyone willing to lend.  The money has been invested in expensive infrastructure; the development of ever-smaller mobiles or it has been used to pay massive fees for mobile phone licences.

The FSA’s warning coincided with the many problems that many telecoms firms were revealing.  Share prices are falling, difficulties finding finance to pay for the new 3G mobile phone project.  Motorola issued a profit warning, but indicated that it was an industry wide problem.

One senior banker blames the problems suffered by mobile phone companies on governments.  They have pulled money out of the sector by forcing up the price of the 3G licences, and also may have weakened the firms by encouraging them to overbid.  But shifting the blame does not remove the problem; many telecoms firms are running out of cash.

The Bank of England has joined financial regulators in warning banks of the risk of heavy lending to telecoms companies.  The warning, contained in the Bank’s latest six-monthly review, comes under light of the very high prices telecoms firms are paying for 3G mobile phone licences in the UK and Germany.  The Bank noted the companies’ heavy financing needs and said returns were “some way in the future”.

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It said awareness of the risks involved in lending to the sector had risen and “some but not all” banks had started to monitor or limit their exposure to the sector.  In an article on the review, the Bank said, “One risk is that income generated from the new 3G technology may be lower than expected, and insufficient to service the borrowing”.

Major international banks have generally underwritten their borrowing.  But, increasingly, the banks are becoming wary about underwriting such debts.  They are concerned about being over-exposed to this cash hungry industry that is proving slow to deliver ...

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