The European Commission said it has given the Spanish government three months to inform the EC on the steps it will take to create a level playing field for the Global System for Mobile communications operators in its market.

The EC wants to know how the Spanish government plans to compensate Airtel Movil, the country’s second GSM provider which launched service in October 1995, for the $705 million license fee it was required to pay. The public telecommunications provider, Telefonica Moviles, was granted a GSM license without an initial license fee, said the EC.

The EC has been in discussions with the Spanish government since July 1995. Last April, the EC requested the government refund the fee paid by Airtel or adopt equivalent corrective measures.

Spanish authorities then proposed to transfer the cost of providing fixed cellular connections to the public network in remote areas from the principal public operator, Telefonica, to a 100 percent subsidiary which operates mobile telephone services for the public operator, said the EC. The Spanish government, however, didn’t provide enough evidence to allow the EC to consider the project equivalent to the initial payment.

The concession granted to Telefonica in 1991 allowed for the public operator to obtain its GSM license without any further payment. The EC said the situation allows for Telefonica to strengthen its dominant position in the GSM market.

The EC also is afraid that Telefonica’s lead position along with any limitation of production, markets or technical development in relation to GSM are likely to delay the process of steadily reducing tariffs for GSM service.

“In the absence of the license fee imposed on AirTel, price competition would have been stronger and GSM tariffs would have fallen more quickly,” it said.

Italy, Belgium, Ireland and Austria, all members of the European Union, have granted their second mobile license under a procedure similar to Spain, but have since applied corrective measures after EC intervention.

Belgium, Ireland and Austria imposed a similar payment on the public operator while the Italian government proposed a package of corrective measures that the EC agreed upon.

Airtel’s ownership includes telecommunications giants AirTouch Communications Inc. and British Telecommunications, as well as Spanish financial entities and other Spanish companies. According to international reports, Telefonica is planning an international public offering next month.


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