UMTS attention turns to Italy

0
Share.

GENEVA-With auction prices of the United Kingdom’s five third-generation licenses beating even the most inflated analyst forecasts, all eyes are now on Italy, which is set to allocate five 15-year Universal Mobile Telecommunications System (UMTS) licenses in a few months.

Europe’s largest mobile market with more than 30 million wireless users, the Italian predilection for conversazione has seen the country outstrip even the United States in terms of digital mobile user numbers to become the world’s second-largest market behind Japan. Now, as Italians’ unquenchable thirst for new mobile services continues to drive growth of around 10 percent, the world’s biggest telcos are betting on the Italian market as the nearest they have found to a sure thing in the untried world of broadband wireless.

Italy is set to initiate its UMTS licensing process later this year through an auction, with the winner decided on the basis of pre-set parameters. The government previously said the licenses would be tendered through a “beauty contest” that would have seen the government evaluate bids based on operators’ rollout plans, wireless experience, financial viability and a range of other factors. But while the regulator, the Autorita per le Garanzie nelle Comunicazione (AGC), initially rejected the kind of bidding free-for-all seen in the United Kingdom, observers say prices will nonetheless be a key element in the winning tenders.

Sky-high bids for U.K. licenses from players Vodafone AirTouch, British Telecom, One 2 One, Orange and Canada’s Telesystem International Wireless have led Italy’s Ministry of Communications to review the amount it hopes to raise from the sale, with original forecasts of a total sale price of between 3 trillion-4 trillion lira (US$1.5 billion-$2 billion), now giving way to speculation of a price tag as high as US$11.8 billion total for the five licenses.

While Communications Undersecretary Michele Lauria has so far refused to be drawn publicly on new pricing estimates, he admitted current predictions are probably too low, adding that Germany, Europe’s second largest wireless market, is also re-examining the price tag it puts on its licenses, due for auction later this year.

The Italian regulator’s original decision to opt for a considered evaluation of all bids rather than a straight-out auction prompted strong criticism before it was overturned when a new government took office in late April, said Luca Radicati di Brozolo, a telecom specialist with Chiomenti Studio Legale in Rome. “Many people have a problem with the [beauty contest]arrangement because it inevitably lacks a level of transparency. In addition, there’s the view that operators may be able to pick up very valuable 3G licenses for much less than they’re worth,” Radicati di Brozolo said.

Others, though, sound a word of warning about the spectrum auction process, where frenzied bidding can drive operators to pay too much and saddle them with a network that can never hope to recoup its costs. “It’s important to get things in perspective. Italy may be one of the world’s largest mobile markets, but most of these users are residential subscribers accessing via pre-paid cards,” said a senior analyst at Rome-based Logica Consulting. “If third-generation networks hope to turn a profit, UMTS license winners are quickly going to have to find some way of selling their services into the business market.”

Italy’s four existing GSM operators-Telecom Italia, Omnitel, Wind and Blu- have all indicated their intention to bid for a UMTS license later this year. Other contenders are likely to comprise a mixed bag of telecom-oriented companies, from Spain’s Telef

Share.

About Author