Mystery Bidders Enliven Italy's UMTS Auction

A last minute application from Anthill SpA, an unknown company based in the southern provincial town of Matera, has added a touch of mystery to the competition for Italy's third generation mobile phone licenses.

Anthill and Tu Mobile SpA, another outsider based in the Sicilian town of Catania, raised the number of bidders to eight and could help to push up the cost of the five available licenses, observers said. Both companies say they want to represent the interests of small and medium-size businesses in the economically backward south.

"Everyone was surprised by the arrival of this eighth consortium," said a Milan telecommunications analyst who asked not to be named. "Either there is a major player behind them or, if they are looking for a partner now, they have very little hope. If they don't find one, they risk being eliminated at the first hurdle." An initial screening process is due to be completed on September 2, and newspaper reports have indicated Anthill could be eliminated at that stage.

There is speculation that the mystery bidders are acting as stalking horses for major telecom operators to drive up the price paid in Italy by their European competitors. Alternatively, they could simply be taking advantage of some high profile and relatively low-cost publicity, observers said.

"It's conceivable that a competitor could be interested in driving up the price of the license in a country that he didn't intend to operate in, but it would be a highly risky strategy, and you could end up saddled with a license that you didn't want," said Emanuele Castrignano, president of Tu Tlc Utilities SpA, the lead partner in Tu Mobile.

"The arrival of an extra two consortia will increase competition, if their applications are accepted," said Paola Toschi, an analyst at Banca Leonardo SpA in Milan. "The Italian mobile phone market remains the most dynamic and interesting in Europe. It's likely that the price of the licenses will be on about the same level as that paid in Britain and Germany," she said.

The two newcomers are embarked on an authentic giant-killing enterprise. They have to compete against established cell phone operators such as Telecom Italia Mobile (TIM) SpA, Omnitel Pronto Italia SpA, Wind SpA, backed by France Telecom SA, and Blu SpA, backed by British Telecom PLC. The other challengers -- Andala SpA, with the support of the cash-rich Hong Kong conglomerate Hutchison Whampoa Ltd., and Ipse 2000, backed by Italy's Fiat Group, Finland's Sonera Group and Telefonica SA of Spain -- also make formidable competitors.

Until now, Anthill has announced the identity of 10 of its partners, mainly active in telecommunications, information technology and insurance in southern Italy. One company, Siref SpA of Milan, has been identified as a fiduciary company of the Banca Commerciale Italiana SpA, operating on behalf of one of the bank's clients.

Anthill has promised further announcements on its financial and technological partners next week and has expressed confidence that it will be able to meet the technical requirements of the UMTS (Universal Mobile Telecommunications System) tender. These include a paid-up share capital of 800 billion lire (US$375 million) and bank guarantees worth 4 trillion lire, plus a partner with at least three years telecommunications experience.

"There is some information that we can't divulge for the moment," said Angela Papa, a spokeswoman for Anthill. "The fundamental idea is to boost the growth of southern Italy and of small companies," she said.

Tu Tlc Utilities' Castrignano also expressed confidence in Tu Mobile's ability to compete on level terms with the major operators. Some of his rivals are very rich, very big and very much in debt after committing themselves heavily elsewhere in Europe, while Hutchison is interested in speculative investments that offer a rapid return, he said. "I say the game is wide open. We have found sufficient funds from a pool of banks and investors," he said in a telephone interview.

Unlike Toschi, Castrignano does not believe the cost of the licenses will skyrocket, as in Britain and Germany. Only TIM and Omnitel are committed to winning a license at all costs, he said. "My feeling is that the value of the Italian licenses will be lower," he said. "The GSM (Global Systems for Mobile Communications) market here is already saturated ... My feeling is that everyone has calculated what is a realistic figure to pay and will withdraw when it is passed. They won't allow it to turn into a bloodbath."

Win or lose, Tu Mobile intends to expand its activities into Eastern Europe and North Africa. "We have identified the Mediterranean basin as our area of opportunity," Castrignano said.

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