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EDITIONS
Friday, 26 January, 2001, 18:48 GMT
US wireless auction raises $17bn
View of Manhattan in New York City
Licences for New York City were some of the most sought after
A major auction of mobile phone licences in the United States has ended after 101 rounds with bids totalling $16.86bn (11.56bn).

Unlike most European licence sales, the US licences were sold on a local rather than national basis, with 422 permits in total up for grabs.

The total amount raised is much less than that paid in auctions in the UK and Germany last year.

But the estimated $4.07 the carriers paid for each megahertz unit of spectrum is just one cent less than that paid in the UK and German sales.

Larger risks

The amounts paid in those auctions had raised concerns among banks and investors that telecoms firms were taking on larger risks than the uncertain business models for providing new, third-generation services justified.

Shares in European telecoms firms have fallen steeply since mid-2000 and subsequent European auctions mostly generated much less than originally expected.

US telecoms stock prices have held up much better and the auction has not prompted the same degree of concern among observers - partly because the US business model is different.

The final amount raised was roughly in the middle of the $15bn-20bn range expected.

Big three buyers

The biggest individual buyer in the US auction was Verizon Wireless - a joint venture of US firm Verizon Communications and the UK's Vodafone - which picked up 113 licences - more than a quarter of those available - for $8.78bn.

These included two licences in New York City, for which it paid more than $4m in total, and others in key markets such as Boston, Los Angeles and San Francisco.

Cingular Wireless - a joint venture of BellSouth and SBC Communications - and AT&T Wireless were also big winners.

Together, the three groups accounted for 83% of the auction proceeds.

Criticism

The AT&T-backed group - Alaska Native Wireless - paid $2.89bn for 44 licences while Cingular stumped up $2.35bn for 80.

In another difference from European 3G, the new US licence holders will be able to use their spectrum for existing second-generation services.

Many, including the three big groups, already have network infrastructure in place and so will be making use of their new licences straightaway.

Industry experts say the US licences are effectively 2.5G, rather than fully-blown 3G.

They are known as broadband personal communications service (PCS) licences.

Some observers have criticised the licence sale, saying it was designed to offer opportunities for smaller companies but ended up being dominated by the biggest players, who invested in or struck alliances with a string of smaller rivals.

Verizon was the only national player not to link up with a smaller operator.

Another auction

Analysts said some losing bidders might challenge the auction's outcome. But they said any challenges were unlikely to succeed.

Another auction is due to take place in March, this time of spectrum currently occupied by television broadcasters.

However, that capacity will not be freed up by its present users until 2006.

Third-generation licences will not be auctioned until 2002, the Federal Communications Commission has said.

The broadband PCS licences are intended to allow operators to offer services including fast internet access from mobile phones.


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24 Jan 01 | Business
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