tele.com, April 16th 2001
By Joyita Haldar
With valuations down by 50 percent and bankruptcy a serious possibility, mobile operators across Europe are paying a heavy price for the ownership of their third-generation (3G) licenses. The problem is so bad that European Union (EU) telecom ministers met in Luxembourg early this month to discuss ways to reduce the debt problems. Many ministers seemed to imply that softening the terms of 3G licenses might be one way to go. Recent relief-seeking efforts by four of Germany's six 3G license holders, however, show just how hard that route can be. Already in debt after paying 8 billion euros (US$7.1 billion) each for licenses, the four operators-E-Plus Mobilfunk GmbH (Dusseldorf, Germany), Group3G (Munich, Germany), MobilCom AG (Rendsburg-Buedelsdorf, Germany) and Viag Interkom GmbH & Co. (Munich, Germany)-now face the added burden of having to spend billions in infrastructure building costs, a challenge faced by 3G license holders even in Sweden and the United Kingdom. Despite lobbying German regulator Reg TP (Bonn, Germany) for months, the four have gotten nowhere with their suggestions for sharing infrastructure costs. “We will not change the rule book on 3G licenses, which clearly states that all licensees are required to build their own networks,” confirms Harald Doerr, spokesman for the German telecom regulator.
There are many reasons behind the Reg TP's rigidity. Network sharing could decrease competition on the infrastructure level, resulting in less differentiation between the services. Sharing might also seem unfair to license bidders that lost because they couldn't prove they had the resources to build their own nationwide network. Changing the rules after the licensing could open the door to lawsuits against the Reg TP from spectrum bidders, consumers and service providers, delaying service rollouts until the suits were resolved. “It would prove to be very good news for attorneys if any changes were made,” says Sigmund Hoenigsberg, senior consultant at management and technology consulting firm Arthur D. Little Ltd. (London).
But others suggest that network costs could be shared without setting off a flood of litigation. “The network will comprise active components such as the radio part and passive components like masts and sites,” says Paul Lufkin, director at investment bank ARC Associates (London). “If the Reg TP lets the cost of deploying passive components be shared equally, it could still ensure six separate core networks while allowing for the sharing of passive components' costs.” Lufkin emphasizes that rollouts will be slower if the licensees have trouble funding the network, which will slow down service deployment.
T-Mobil, the mobile arm of incumbent Deutsche Telekom AG and a 3G licensee that is monitoring the network-sharing proposal without actively participating, doesn't completely agree with Lufkin.
T-Mobil spokeswoman Andrea Vey suggests that sharing passive components could be a solution-but only if companies lease sites or masts from another operator and do not share the costs of deploying those elements. “The Reg TP has already agreed to allow passive components to be leased,” Vey says, “so operators that face difficulties in financing a whole network can use another operator's masts and sites for a fee.”
Meanwhile, one licensee prefers things to stay just the way they are. With Germany's highest mobile subscriber base at 20.7 million, D2 Vodafone (Dusseldorf, Germany) objects to any cooperation in network building. “When the operators bid for a license, they were aware that each had to build its own infrastructure. It is only fair they stand by the rules,” argues company spokesman Christian Schwolow. Lufkin says this works in D2 Vodafone's self-interests: “Europe-wide, the Vodafone group enjoys a broader market coverage and has better access to funds than some of the others. Obviously, it makes business sense to oppose any formidable competition that might brew up in the event of cooperation, reducing the company's capacity to manage the market lead it will enjoy by being ready to go first.”
Right now, it looks like D2 Vodafone's view will win out, since the Reg TP and other European regulators appear to favor playing by the book, regardless of whether such an approach ultimately fosters competition or cripples it. That means 3G spectrum holders will need to look elsewhere for financial relief.
Reproduced from tele.com
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