ROME-The results of the Italian third-generation license auction are unfortunate for the Italian government and British Telecommunications plc, while most opportune for the five companies that have unofficially won licenses at prices much lower than anticipated.
After just two days of bidding among six mobile groups for five Universal Mobile Telecommunications System licenses, raising about $11.6 billion, Blu pulled out of the auction. The government was expected to raise at least $21 billion from the process.
However, the government has not officially announced the license winners and is reported to be considering re-auctioning the licenses. Such a move would most certainly bring on legal suits from each of the five companies that did not bow out of the auction.
Three of Italy’s incumbent operators are expecting 3G licenses. Telecom Italia Mobile, controlled by Telecom Italia, is the country’s largest operator with around 20 million subscribers. The second-largest operator by subscriber numbers is Omnitel Pronto Italia, backed by Vodafone Group, with about 12 million customers. Wind Telecomunicazion, which is majority owned by Italian utility Enel and in which France Telecom holds a stake, has about 3 million users.
Two consortia without mobile networks in Italy also are expecting to receive Italian 3G presences. IPSE 2000 is controlled 39.25 percent by Spain’s Telefonica, with Sonera holding 19 percent and Italian companies also holding stakes. In addition, Hong Kong-based Hutchison Whampoa controls 51 percent of a consortium called Andala, with Italian company Tiscali holding 25.5 percent and CIR with 15 percent.
The auction came to a quick and abrupt end last Monday, when Italian mobile newcomer Blu withdrew. Blu began wireless operations in Italy in May, and, in addition to its British Telecom stake, is owned 32 percent by Italian company Autostrade, and 9 percent each by Distacom, Edizione Holding and Mediaset. Companies BNL, Italgas and Caltagirone each hold 7 percent of Blu.
British Telecom was under pressure from Blu’s other shareholders to increase its stake to 51 percent. However, British Telecom, facing scrutiny from the financial community for its high debt, preferred to wait until after the auction to take majority control, thereby sharing the cash burden of a license with the other shareholders.
In a statement, British Telecom said it offered to give Blu $217 million to allow it to continue bidding. “BT was prepared to raise its stake and take more of the risk in Blu, but could not take the amount that the other shareholders demanded as the price for continuing the bidding,” the U.K. company said.
British Telecom said shareholders, including British Telecom, BNL, Mediaset, Italgas and Distacom, which together represent a 52-percent majority, voted to continue in the auction, but this was blocked by Autostrade, Edizione Holding and Caltagirone. Under Blu’s shareholder agreements, an 80-percent vote in favor was necessary to proceed.
The withdrawal leaves British Telecom without a 3G presence in Italy, which is Europe’s largest cell-phone market and has one of the Continent’s highest wireless penetration rates.
The German UMTS auction, which ended in August, drew nearly $46 billion, and the Continent’s first UMTS auction-in the United Kingdom in April-raised about $34 billion.
