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The BBC's Kully Dhadda
"The battle for the next generation mobile phones is hotting up"
 real 28k

Sunday, 9 April, 2000, 10:42 GMT 11:42 UK
20bn windfall from phone auction
wap mobiles
The internet on the move on the phones of the future
The Chancellor looks set to gain around 20bn from the auction for licences to operate the new generation of super-mobiles.

After 106 bidding rounds, and with five the 13 original bidders having pulled out, bids totalling 14.5bn have been received by the government - far more than the 5bn it was expected to raise.

On Monday, bids resume after the suspension on Friday after Spanish telecoms giant Telefonica called a time-out, suggesting that they may be preparing to leave the auction.

The bidding must go on until there are only five bidders left - one for each of the new licenses.

Current top bids
Licence A: TIW: 2.87bn
Licence B: Vodafone: 3.6bn
Licence C: One2One: 2.54b
Licence D: NTL: 2.71bn
Licence E: Orange: 2.51bn

The huge prices being paid by companies for the 'third generation' mobile phone licenses - which will give mobile phone users full internet capability, including video conferencing - is a reflection of the belief that the mobile phone will become more important than the personal computer in the future for web users.

But the cost of the licenses - and the associated investment in new networks - could well mean higher costs for mobile phone users in the future.

Bidding wars

A fierce bidding war is continuing between BT Cellnet and Vodafone Airtouch for control the largest license, which will give the winner more capacity in the future than its rivals.

They have emerged as the only serious bidders for the largest of the five licences available to the existing mobile phone operators in the UK, and have already pushed the price for the plum licence B past 3.5bn.

There were no signs of either side being willing to accept defeat as each trumped the other's bids during a day of tension in the marathon poker game.

Both want the licence offering the greatest capacity for handling the vast range of data and functions expected for the mobiles of the future.

Meanwhile, another complex battle is emerging between cable operator NTL - backed by France Telecom , One2One, owned by Deutsche Telekom, MCI WorldCom and Canada's TIW, which is backed by Hutchinson Whampoa.

One license is reserved for new entrants to the UK mobile telecoms market, and one of the existing mobile phone operators (Orange) is now owned by rival Vodafone and will have to be sold in the event of a successful bid.

Bid stakes escalate

This next wave of mobiles (third generation, or UMTS) are expected to be able to show good quality videos and audio on handsets and allow full browsing of the internet in addition to existing phone functions.

Because of the way the auction is structured - rival bids have to be a certain percentage higher - the size of the bids is escalating at an increasingly rapid rate.

Last week the bids for the sought after licence B rose by more than 600m in a single day.

Many experts expect this week to be the knockout blow, with more bidders dropping out as prices escalate.

Neither BT Cellnet nor Vodafone can afford to lose, and the betting is that One2One has the deep pockets to keep its franchise.

But there is little doubt that the new licenses will be fiercely fought over, as companies try to settle old scores or forge new alliances.

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03 Apr 00 | Business
Mobile auction: Latest News
11 Oct 99 | Economy Reports
The Telecommunications Revolution
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