Telecommunications regulator suspends mobile frequencies auction

Prague, March 8 (CTK) - The Czech Telecommunication Office (CTU) said it Friday stopped the auction of frequencies for fast mobile networks LTE because the bids submitted by operators grew from the total starting price of Kc7.4bn to over Kc20bn and are still rising.

The amount of the bids is no longer economically viable and would mean high prices of services and delays in building mobile networks, the CTU said in a press release.

When the CTU made public conditions of the auction, it already emphasised that the main motivation of the auction is fast accessibility of 4G networks and not the state's profit, CTU chairman Pavel Dvorak said.

"Unfortunately, the reality is such that nobody from the new holders of the frequencies would be able to implement the new technology properly under these conditions," Dvorak said.

"It is necessary to realise that the state would make a profit, but end clients would suffer the consequences in the end," he said.

Telefonica, one of the bidders in the auction, said the CTU's decision was wise in the given situation.

However, Telefonica behaved rationally during the auction and confirmed its interest to invest in LTE, the operator's spokesman Hany Farghali said.

For the time being, the company wants to build the network on frequencies it already owns, Farghali added.

Mobile operator T-Mobile said it wanted the auctioning process to continue.

"The goal, that is fast development of high-speed mobile Internet was not achieved during the auction," said spokeswoman Martina Kemrova.

"We believe the new rules will guarantee a more effective (auctioning) process as well as good conditions for a long-term development of the telecommunications sector as a whole," said Kemrova.

Vodafone has taken note of the CTU decision.

Another bidder PPF only said that the operators are analysing the decision.

"We respect the CTU decision to cancel the auction and believe a new auction will be called as soon as possible. Only the entry of a new operator will raise competition on the telecoms market and cut prices for end users," said Jitka Tkadlecova of the PPF press department.

"PPF is still confident that (conditions of the) auction can be set in such a way that it leads to the entry of a new operator," she added.

The CTU observed the parameters from similar auctions in Europe when it was preparing the conditions of the auction, according to Dvorak. However, the auctions elsewhere in Europe also often dragged and prices grew to amounts several times higher than the expected ones and operators then had problems with financing the purchase of frequencies.

One of the latest examples is the Netherlands. Similar results were sharply criticised by the European Commission.

The CTU wants to hold a new auction for the frequencies under adjusted conditions. It expects a similar starting price in the auction and is now revising the conditions of the tender.

Among the bidders that registered in the tender were existing operators Telefonica, T-Mobile and Vodafone, and company PPF Mobile which wants to become the fourth mobile operator.

The auction itself started in November when the companies began to bid for frequencies in the 800, 1800 and 2600 MHz bands divided into 40 blocks.

"The Finance Ministry will ask the CTU to give it information about the schedule of a new auction," Jakub Haas of the ministry has said.

The ministry had reckoned with the income from the auction as with a state budget revenue.

A source familiar with the situation around the auction said the way the conditions were set made it possible to raise prices to unrealistic highs. The conditions, for instance, did not set sanctions for possible withdrawal of the highest bid.

By raising the prices, the current operators may have possibly prevented PPF from getting some of the necessary frequencies.

There is a new possibility under discussion that a pre-auction would be held at which only new investors interested in entering the market would be bidding for part of the necessary frequencies. This has occurred, for instance, in the Netherlands.