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Thursday, 22 March, 2001, 14:59 GMT
Australia's 3G auction disappoints
Tracking share prices on a Siemens concept 3G terminal
3G licenses are no longer as expensive as before
Australia's auction of third-generation mobile phone licences on Thursday failed to raise as much as predicted.

In the end, the auction raised 1.17bn Australian dollars (405m; US$573m) - less than half the amount forecast in the May 2000 budget.

John Howard, Prime Minister
Prime Minister Howard's government is accused of mismanaging the 3G sale
But the country's treasurer Peter Costello described the funds raised as "decent", adding that an early prediction of 2.6bn Australian dollars in the budget had been revised down ahead of the auction.

"The price that was achieved... was a little above what we thought it would be," he said.

Third-generation (3G) mobile phones, or UTMS, Universal Mobile Telecommunications System, offer broadband services, which allows high-speed data transmission and provides internet and video links.

Budget impact

But neither Australia nor its government is in a position to take a budget shortfall of 1.43bn Australian dollars on the chin.

Prime Minister John Howard's conservative coalition government, already charged with mismanaging the economy, now stands accused of mismanaging the sell-off of the mobile phone spectrum as well.

"There's a minimum 1.3bn Australian dollar hole just opened up in the Howard government budget and that leaves its economic management credentials in tatters," charged Labour spokesman Stephen Smith.

The Australian dollar is at historically low levels, the stock market has fallen sharply in recent weeks, and recession fears are hammering both consumer and business confidence.

So it is not surprising that the economy features heavily in Australian politics at the moment, ahead of a federal election due later this year.

Telecom sector

The telecom sector, however, was pleased with the auction's outcome.

"Because we acquired spectrum at the cost we have, there's a greater likelihood of us providing a commercially viable network," said Tim Scott, the public affairs manager of Australia's largest telecom company Telstra.

When governments around the world initially auctioned off 3G mobile phone licenses, many received lofty sums from telecom companies hungry for a slice of a market that everybody predicted would grow.

But much of the early optimism about customers' willingness to spend on mobile data and voice communication has since been replaced with worries about the telecom companies' abilities to recoup their costs.

These days, 3G spectrum auctions tend to raise less, as the companies bidding aim to make sure they do not pay over the odds.

The winners

Telstra paid 302m Australian dollars for spectrum in all capital cities, regional Victoria, Tasmania, South Australia and Western Australia, as well as regional centres in New South Wales and Queensland.

Vodafone paid 253.55m Australian dollars for one of two national licenses, in addition to capacity in all capital cities.

Optus paid 248.97m for the second national licence, as well as extra spectrum in Sydney, Melbourne, Brisbane, Adelaide and Perth.

Hutchinson paid 196.1m Australian dollars for spectrum in Sydney, Melbourne, Brisbane, Adelaide and Perth.


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