UMTS auctions called off in Poland - Government Activity

Telecommunications, Jan, 2001 by Gregory Hoelscher

EASTERN EUROPE -- Following much controversy over its 3G licensing procedures, Poland's Communications Ministry cancelled its UMTS auction at the last minute in early December. This was due to the fact that only three bids (from the three local mobile incumbents) were tabled, while five separate licences were originally planned.

The Ministry announced that it would issue UMTS licences to each of the three local mobile incumbents and that it would issue a fourth licence 'when legal and market conditions allow'. As described in the October issue of Telecommunications [R] International, the Ministry, having seen the large sums extracted through UMTS auctions in the UK, was in a rush to hold its own auction before yearend 2000, after which Poland's new Telecommunications Act comes into effect which puts a one-year moratorium on licence awards.

The three incumbent mobile operators who were issued licenses will still be required to pay [epsilon]650 m each. However, the way in which the Ministry conducted the tender (the short timeframe for its completion as well as its changing terms) discouraged the major global telecom players and foreign investors from taking part.

The situation in Poland contrasts with that in the Czech Republic, which has taken a somewhat slower approach and expects to award licences this summer.

Initial indecisiveness in the Czech Republic regarding both the number of UMTS licenses to award and the method of awarding them -- by auction or by a beauty contest -- caused considerable debate among the various political factions. Last September, the Czech cabinet forecast raising 20 bn crowns (approximately $500 m) from the sale of UMTS licences for its 2001 annual budget. In October, leaders of the two main political parties agreed to sell four licences through an auction to maximise proceeds. Any amount received above the originally planned 20 bn crowns would then be used to pay down state debt or for infrastructure investments.

As time passed and the situation surrounding UMTS licences in other countries became clearer, the Czech Republic appears to have settled on issuing at least a majority of UMTS licences for a set fee to incumbent operators. Ironically, the Czech Republic may issue three licences to its incumbent mobile operators and one licence through auction to a new market entrant, the same as in Poland. Such a plan was to be discussed by the Czech cabinet in mid-December.

Resolving the method of awarding licences soon will be beneficial not only for those directly interested in the Czech mobile market but for those interested in the privatisation of the Czech Republic's two largest telecoms companies, Cesky Telecom and Ceske Radiokomunikace, planned to take place in 2001. Even though the amounts received by governments for UMTS licences has decreased considerably since the UK auction, by virtue of their ownership of EuroTel and RadioMobil (the Czech Republic's top two incumbent mobile operators) the value of Cesky Telecom and Ceske Radiokomunikace is strongly affected by how the UMTS licences will be awarded.