UMTS tender pushed up to October
Following Communications Minister Tomasz Szyszko's statement last Tuesday that the government's tender for five third-generation mobile phone licenses would be held in December, telecom analysts said the sale's rushed timing could result in more favorable prices for the bidders.
Szyszko said bids would be accepted in early October with a deadline of Dec. 7 and that winners would be announced before 2001. He also said that the format of the sale would be a "beauty contest with price elements".
With Poland's new telecommunications law taking effect on Jan. 1, 2001, the Universal Mobile Telecommunications System (UMTS) licenses would have to be sold this year since the law prohibits any operating licenses from being sold during a one-year transition period. In addition, the government previously said that it wants to add the revenue from this year's UMTS license sale to the federal budgets in 2001 and 2002.
The government's harried pace to complete the sale this year could result in lower fees for operators that place bids, telecom analysts said.
"Being in a rush, the (Communications) Ministry can't negotiate the best prices, and it will have to compromise," said Andrzej Kasperek, a telecom analyst at Erste Securities Polska.
The government previously said it expected a total of zl. 14 billion ($3.26 billion), or zl. 2.8 billion ($651 million) per license. Poland's mobile operators estimate that each license should cost euro 100 million-euro 150 million.
"The high prices that are expected by the government and the Communications Ministry don't really have any explanations, and they are not proved by any economic indicators," said Robert Niczewski, spokesman of Polska Telefonia Cyfrowa (Era GSM).
Poland's UMTS tender comes at a time when other third-generation mobile licenses have been sold for high prices in other Western European countries. Britain's auction of five UMTS license in April, for example, netted the government Ł22.5 billion, more than seven times the amount originally expected.
Domestic mobile operators and telecom analysts were also baffled by Szyszko's statement that the form of the tender would combine features of a beauty contest and an auction without any further explanation about the hybrid format.
In a beauty contest, the government selects a set of criteria, such as financial resources, technological expertise and investment plans, against which all participants are assessed. In an auction, licenses are awarded to the top bidders. Both formats have been used to sell UMTS licenses in Western Europe, where the sales have taken several months to complete.
Michal Marczak, a telecom analyst at BRE Bank Securities, said the government's unexplained hybrid format could indicate that a different range of radio frequencies would be offered for each license with some frequencies being wider than others. This element would constitute the auction part of the criteria, he said.
However, Przemyslaw Sypniewski, an adviser to Szyszko, said last Friday that the selection of the winners would be based on the bidders' "complete offers" a combination of price along with other criteria, including company credibility, amount of investment, presence on the market and additional grants that the firms would provide.
The government said one UMTS license would be reserved for the national incumbent operator Telekomunikacja Polska (TPSA), which owns part of the mobile service operator PTK Centertel. But TPSA must meet the same criteria as the other bidders to receive its license for Centertel, Sypniewski said.
The country's other two mobile operators Era GSM and Polkomtel (Plus GSM) as well as independent alternative fixed-line telephone service provider Netia will place bids for the other licenses, leaving a fifth license for a possible international telecom firm.
While Marczak said that the sale of a fifth license would decrease the general value of the other licenses, Kasperek said the decision to offer five licenses played into the government's strategy of trying to commend an optimal amount from the rushed sale. The fifth license would be offered to make the four existing bidders aware that another possible bidder might offer a higher price, forcing them all to increase their bids, Kasperek said.
But analysts also said it was unlikely that any other international telecom giants would enter a bid for a fifth license since most major European players interested in Poland's mobile market already have stakes in the country's telecom operators. France Telecom owns 33% of Centertel. Deutsche Telekom controls part of Era GSM. Britain's Vodaphone and Denmark's Tele Danmark hold stakes in Polkomtel, while Sweden's Telia controls Netia.
Kasperek said it would be unlikely that a Japanese firm would enter a bid since the Japanese have not participated in other European UMTS license tenders. Without a potential fifth bidder, he said, "the lobbying of the local operators (for lower license fees) might be so strong that the Communications Ministry might be forced to lower the fees".
- Magdalena Wierzchowska contributed to this article
