Bids in the German auction of Universal Mobile Telecommunications System licenses have jumped substantially during week two, with the total bid amount standing at around $22 billion at the end of nine days and 115 rounds. The price tag thus far is nearly 65 percent of the total amount generated from the U.K. UMTS auction, which lasted a total of eight weeks and 150 rounds and ended in May.
For the second week, MobilCom continued to hold the highest bid for a 2 by 5 megahertz spectrum block at nearly $1.9 billion. Deutsche Telekom AG’s T-Mobil subsidiary was not far behind with a $1.88 billion bid for one spectrum slice.
Seven groups are participating in the auction of 12 frequency blocks. Operators must acquire at least two sets of frequencies, but no more than three, to garner a third-generation license.
With a wireless penetration rate of about 33 percent at the end of June-much lower than most European countries-the bidders realize the importance of grabbing a slice of the German mobile market, said Jake Saunders, regional director of The Strategis Group’s London office.
“In Germany, there’s still a block of potential end users who haven’t subscribed to mobile services,” he said, noting the difficulty of extracting subscribers from other operators vs. signing up new users.
MobilCom, in which France Telecom holds a 28.5-percent stake, is widely seen as the nonincumbent having the best chance of garnering a German license. MobilCom currently resells wireless services from Mannesmann Mobilfunk and T-Mobil and has about 2.2 million mobile users in Germany. Saunders noted the possibility of France Telecom acquiring 100 percent of MobilCom if it is successful during the auction.
However, Group 3G, a consortium comprising Spain’s Telefonica and Finland’s Sonera, cannot be discounted, particularly because both carriers were essentially locked out of the British 3G market by not winning licenses there.
“It’s hard to tell who’s going to blink first,” Saunders said.
Debitel, backed by Swisscom, is the only other nonincumbent contending for a German license.
The number of licenses awarded in Germany is dependent on the number of spectrum blocks purchased by each operator. If all four incumbent operators-Mannesmann, T-Mobil, Viag Interkom and E-Plus-come away with three spectrum blocks each, no spectrum will be left for a new player, although that scenario is unlikely.
“Operators that want to get three blocks will have to settle for two just because of the price,” said Saunders.
Likewise, if each operator wins only two spectrum blocks, the market would see six 3G players.
No matter who comes away with the prize at the end of the bidding, the 3G landscape is guaranteed to be different than the current playing field. The German UMTS license conditions mandate that the spectrum cannot be used for GSM-type services.
“GSM is used for voice, so obviously, operators can’t just sit on the 3G licenses and use them to overcome capacity constraints,” said Saunders.
And that is just as well considering the final price tags for 3G licenses will mandate operators ensure users become extremely reliant on their mobile devices.
Saunders said m-commerce applications will quickly ramp up, citing advertising on wireless phones and banking applications as the most likely leaders.
Currently, each bidder must offer at least a 10-percent premium over the current top bid, although German telecom regulator RegTP can decrease that amount to 5 percent as the auction progresses and bids continue higher.
