Eight bid for Italy phone licences

Telecom Italia Mobile will be bidding for one of the new licences

The battle for control of the Italian mobile phone market has begun with more bidders than expected for the next generation of mobile licenses.

Eight bidders presented their plans for the five available third generation licenses which will allow mobile phone users high-speed internet access and video on demand.

Italian mobile phone bidders

Telecom Italia Mobile

Omnitel (Vodafone)

Blu (BT/Mediaset)

Wind (France Telecom)

Ipse (Telefonica)

Andala (Hutchison Whampoa)

TU Tlc Utilities

Antill

Based on their business plans, the Italian Communications Ministry will then give a green light to some or all of these companies to submit bids in October. The bidding process, which could last until the end of the year, is expected to raise $15bn - $20bn (£10bn - £13bn) for the government, less than the amount raised by the UK and German auctions.

In Italy, the bidders include the country's current major mobile operators, Telecom Italia Mobile (TIM) and Omnitel, controlled by Vodafone. Also in the running are Wind, owned by electricity company Enel and France Telecom, and Blu, a consortium, part-owned by BT.

The newcomers are consortia Andala, Ipse, TU Tlc Utilities, and Anthill, which only filed its bid at the last minute.

Andala is a consortium controlled by Hong Kong conglomerate Hutchison Whampoa with internet service provider Tiscali, while Ipse is run by, among others, Spain's Telefonica, Finland's Sonera and Fiat cars.

The ownership of TU Tlc Utilities is unknown, but believed to include Atitalia, while the identity of Anthill's backers has not yet been revealed.

The companies have until 11 September to present their final business plans.

Speculation is rife that Deutsche Telekom, the only major European telecoms company that is not bidding for an Italian license, may try to link up with one of the consortium, or with Telecom Italia, which it unsucccessfully tried to take over last year.

Credit fears

But even as companies prepare their bids, shares in telecom companies across Europe are sliding as the cost of financing these licences hits home.

So far, shareholders have failed to be convinced that the licences are worth the money that is being paid for them.

Shares in Spain's dominant telecoms company Telefonica fell 2% on Wednesday, furthering losses made since it emerged that it and Finland's Sonera had won a German licence for $7.5bn.

Its weakness dragged Spain's Ibex index lower.

In the UK, BT shares were weakened by news that it had postponed its $10bn bond issue. It had decided to do this amidst fears that its credit rating could be downgraded by the US credit rating agencies.

The company was set to be one of the first telecom companies to raise money in the bond markets to finance the purchase of UMTS licences.

Telefonica still plans to go ahead with its plan to sell at least $5bn worth of bonds in September.

Boost to Treasuries

So far, national treasuries have benefited heavily from the sale of licences, the profits from which have helped reduce national debt.

But not all licences have been sold for bumper prices.

Prior to the UK auction, few countries realised how much telecom companies were prepared to pay for licences.

Spain awarded four licences earlier this year for a total of 500 million euros ( $450m) in a beauty contest, where bids were assessed on technical merit.

While others might have kicked themselves for missing a golden opportunity to fill the government's coffers, Spain is hoping that this means prices will be kept low for the consumer.

"Less money was raised in Spain from the licences than in other countries and the government wants that to have a positive impact for consumers," an Economy Ministry spokeswoman said on Wednesday.

Even after the success of the UK auction, the Dutch government managed to raise just a fraction of the licence revenue it had hoped for.

And France is holding a "beauty contest", awarding four third generation licenses for a fixed sum of $4.4bn each, after examining closely the credentials of potential bidders.