DUBLIN, Ireland-In any international cellular tender, carriers must determine whether the price paid represents true value for the money or a sizable gamble. On the other side of the coin, wireless license fees can be the equivalent of a gift from the gods for governments with weak economies.
The early development of mobile communications is littered with examples of operators who paid relatively little for their licenses and are now making sizable profits. Now even governments of developing countries understand the value of the license for delivering mobile services.
The explosion in mobile phone use around the world has led operators-from the United States and Western Europe in particular-to eye immature markets through joint ventures and acquisitions. But any hopes they might have of picking up a license “on the cheap” have disappeared if recent awards are any indication.
“In the past, many countries simply offered licenses to the highest bidder, which meant that the operators bid more than they could afford and the network suffered,” said analyst Neil Kirby of U.K-based market research firm Mason Communications.
“Now there is normally a two-stage approach-a financial element and a `beauty contest’ that focuses on the long-term strategy. And the bid preparation alone can cost in excess of 1 million (US$1.65 million).
“Now, while (it) is common to cap the price of the license in order to encourage bidders to commit to (a) large investment in infrastructure, governments will also give extra weight to bids from operators who also decide to locate manufacturing or other facilities in the country, which will be beneficial to the economy in the long run.”
Kirby suggests that the “take the money and run” approach is less favored, even among financially weak nations.
“Mobile licenses are perceived to be a real pot of money for operators, so governments know they can ask for a lot of cash and still place conditions on coverage levels or tariffs. But there is only so much money they can ask for a license, and if the successful bid is excessive, the country loses out in the long run because there is less money flowing into the economy through network investment.”
That didn’t stop the Moroccan government from securing almost US$1.1 billion in August for its second license-the largest single foreign investment in the country’s history. The money paid by the purchasing consortium, which includes Telef
