BUCHAREST, Romania-Most countries in Western Europe have awarded third-generation (3G) licenses at high fees to a few operators. Companies are expecting revenue from the services within a decade, according to consulting companies.
A report from the UMTS Forum released in April said users of 3G mobile services will generate revenues of US$322 billion globally by 2010. Global revenue from mobile services currently totals US$270 billion a year, and the UMTS Forum expects that in nine years with the contribution of 3G users, the revenue will continually increase.
Beyond Western Europe, several Central and Eastern European countries are in different stages of the 3G licensing process. The only two countries in the region that currently have licensed 3G services are Poland and Greece, and some Eastern European operators have said it is premature to issue licenses for these kinds of services.
However, most industry professionals agree that GSM operators in the region need 3G licenses for capacity and continued growth, and carriers are looking at ways to help make Universal Mobile Telecommunications System (UMTS) ventures profitable. Ted Lattimore, chief operating officer (COO) at Mobifon GSM, a Romanian operator, said at CERF 2001, a Romanian communications and information technology exposition held in May, the company is open to collaboration with new operators when UMTS technology is implemented.
“This option is a wise one for Romania. We are open to any proposal in this sense,” said Lattimore.
The average revenue per user (ARPU) levels throughout the region are less than in other parts of the world, and one reason is the gross domestic product (GDP), which is lower in this region than in Western Europe.
Nonetheless, fees for licenses are high. In Poland, the prices surpassed US$650 million total for three 3G licenses, and in Greece, the fees hit US$378 million for all three licenses awarded.
Many industry professionals have said such prices are too high for the Eastern Europe region, and operators said governments should award the licenses through “beauty contests,” similar to the tender held in Finland. However, the governments of the Czech Republic, Slovakia, Slovenia and Romania plan to sell the licenses.
Another problem faced by future UMTS operators is infrastructure costs, which will also be high. The Congress of Local and Regional Authorities of Europe, part of the Council of Europe, approved a common strategy for managing planning issues regarding mobile telephone base stations. A paper from Italian member Moreno Bucci recommended a “greater involvement of local and regional government bodies in planning the development of sites for mobile telephone networks, establishing criteria for such sites and exercising control over telephone installations.”
The paper is one of the first to recommend European governments apply new politics in constructing and sharing wireless communications sites.
Country updates
In the meantime, governments from Eastern Europe are preparing for 3G licensing with expectations to receive big earnings for their national budgets. Specifically, the Russian Ministry of Communications is working on the award process, but it has not provided details about the procedure. The Russian media speculates the government will award two UMTS licenses in each of the country’s seven regions.
In principal, three companies are most interested in future 3G services in the Moscow area-MTS, Vimpelcom and Sonic Duo. All three companies have foreign capital from Germany, Norway and Finland, respectively.
According to Serghei Avdeeva, vice president of Vimpelcom, the cost of launching a 3G network in Moscow is around US$500 million. Another problem in Russia is the lack of spectrum available for 3G networks. The majority of spectrum is used by military applications, and it seems frequencies will be converted from military use to civilian use. The cost of a UMTS license has not been specified, but some rumors said the prices would vary from US$1 million in some Russian regions to US$3 million in Moscow.
Croatia also plans to grant UMTS licenses after it holds a GSM mobile license tender. Five months after the third GSM license is granted, expected soon, the Ministry of Transport and Telecommunications will award UMTS licenses.
The Ministry of Transport and Telecommunications plans to award three licenses through a beauty contest, with applicants expected to meet minimum technical and financial requirements. Croatia’s GSM operators Vipnet, owned by Mobilkom Austria, and Cronet, the state-owned GSM operator, are the most interested in 3G licenses.
Slovenia plans to auction three UMTS licenses for a minimum of US$90 million for each license, having failed in an earlier attempt in March. The country’s first tender required at least two bidders and failed due to the participation of only one company, Mobitel, one of the country’s two GSM operators. According to Joze Unk from the Slovenian government, the authorities are repeating the tender with a lower fee requested. At the first call, the minimum fee for a license will be US$105 million and at the second call, the fee will be decreased to US$90 million.
“Within the first call for tender, there had to be two bidders to be regular; now one bidder is sufficient,” said Unk.
The deadline for submitting tenders is the beginning of September. Mobitel has said it will also apply in the second process.
Hungary postponed its planned auction of UMTS licenses, originally scheduled for later this year, due to unfavorable market conditions. The auction is now expected to occur sometime in late 2002 or even 2003.
Greece’s telecom regulator EETT awarded three UMTS licenses in July, one less than it had planned, when a fourth bidder failed to emerge.
The country’s three incumbent operators, CosmOTE, owned 59 percent by OTE; Panafon Vodafone, owned 55 percent by Vodafone Group; and Stet Hellas, whose shareholders include STET Mobile Holdings, Telecom Italia Mobile and Verizon, all received a UMTS license. The starting price was US$126 million, and CosmOTE and Panafon each bid about US$48.90 above that price, while Stet bid US$22.30 above the minimum price.
“The introduction of 3G is eagerly awaited by the public and media as it will provide users mobile access to high transmission rate data services and other advanced applications-for example, mobile banking, location-based services, video streaming, etc.,” said Dr. Anastasios Papatsoris, director of EETT.
Once certain rollout requirements have been meet, operators are allowed to form a common network, provided at least two such networks exist in the geographical area of concern. “For remote locations, EETT may consider the existence of a single network provided competition rules are not infringed,” said Papatsoris.
In Romania, Dan Nica, minister of communications and information technology, said the licenses for 3G networks would be granted in the third quarter of 2001, without specifying whether an auction or beauty contest would be used.
