Bids for each of the five Universal Mobile Telecommunications System licenses in the United Kingdom reached or topped $3 billion last week. All 13 original bidders are still are in the auction, now in its fifth week.
“I think it speaks volumes that of the 13 bidders, no one has withdrawn and no one has been excluded,” said Jake Saunders, regional director of the Strategis Group based in London. “There is a strong belief that this is the next big one.”
The third-generation license auction will continue until only five bidders remain.
The bid for license A, reserved for a new U.K. wireless player, reached $3.34 billion at the close of round 91 at the end of last week. SpectrumCo, a consortium that includes Virgin Mobile and Nextel Communications Inc., held the high bid.
The license A offer was not far behind the auction’s highest bid of $3.55 billion for license B, which comprises the largest spectrum block. Vodafone AirTouch held the highest license B bid at the close of the fourth week of bidding.
License E drew a high bid from NTL Mobile, backed by the U.K. cable company, for $3.11 billion, and bids for licenses C and D each drew about $3 billion. WorldCom Wireless held the license C high bid at the end of 91 rounds, and Spain’s Telefonica was license D’s highest bidder.
Going into the auctions, most analysts believed each of the United Kingdom’s four incumbent mobile operators would walk away with a license, but those predictions are changing, particularly in light of the financial muscle among the participants currently without U.K. wireless interests.
“[The new players] don’t have any slice of the action at the moment. So getting a 3G license gets them into the mobile market and gives them the next-generation license as well,” said Saunders. “It’s going to be bitter.”
Although the four incumbents have steady cash flow and financially strong companies like Telefonica, MCI Worldcom Inc. and NTL have the resources to pay off the debt incurred with a UMTS license, Saunders said 3G pricing will be high, particularly in the early stages.
“Somehow these licenses have to be paid off …,” he said. “Initial pricing will have to be high.”
Initially, the auctions were predicted to last only six weeks. However, Saunders said he expects the bidding to last 150 to 200 rounds, meaning the auction potentially could be only at the half-way mark.
The United Kingdom’s mobile-phone users nearly doubled in 1999 from 12.9 million users to more than 24 million subscribers, according to London-based Continental Research.
