Israel sells knockdown 3G licences

The prices were a fraction of those reached last year at the height of the telecoms boom in countries such as Germany and the UK.

The three successful bidders were Cellcom Israel, Partner Communications and Pelephone Communication.

Cellcom and Partner paid 220m shekels ($51.92m, £35.68m) each - the minimum bid price - and Pelephone paid 225m shekels for the licences, the Communication Ministry said.

3G licence sale proceeds
Germany $46bn
UK $34bn
Italy $10bn
Switzerland $113m
Israel $157m

Downturn

The ministry hoped to raise one billion shekels last year, when operators were paying hefty sums for 3G licences.

But, given the telecoms market downturn, the Israeli licences were never expected to fetch much more than the minimum bid price set by the government.

Several operators built up huge debts acquiring licences in Europe, creating financial problems for themselves when the market turned down and leading to sharp share price falls.

Some have had to slow the pace of investment and delay the anticipated start dates for 3G because of financial difficulties.

Development not price

Awarding the licences, the Israeli government stressed that it was not the licence prices but the future development of 3G networks that really mattered.

Analysts say many west European countries will not see 3G until 2004.

Israeli 3G is unlikely to arrive before then, they said.

Partner said it would begin 3G operations one year earlier, in 2003, but complained about the "large outlay" to obtain the licence.

Cellcom and Pelephone declined to comment on the licence awards.

The new services are expected to include high-speed, always-on internet access and video and networked games capabilities.

Cellcom is owned by US company BellSouth, Brazil's Safra group and Israel's Discount Investment Corp, while Pelephone is jointly owned by state-run Bezeq Israel Telecom and Shamrock Holdings, the US. investment arm of Roy Disney.

Partner's main shareholders include France Telecom's Orange.