Analysts: Users to Bear Euro 3G Auction Costs

FRAMINGHAM (08/18/2000) - Analysts believe that carriers who bid a total of US$46.2 billion for 3G (third-generation) wireless licenses in Germany will try to stick users with the bill, but wonder how much of that stiff overhead customers are willing to absorb.

"These licenses will have an impact on pricing, but at the end of the day, it's users that will determine prices," said Dirk Bout, senior analyst with Dataquest Inc.'s mobile communications group in Amsterdam. "If anyone should worry, it's the (company) shareholders, because if users aren't willing to pay for (the cost of the licenses) then they (the shareholders) will have to."

Alan Reiter, an analyst with Wireless Internet and Mobile Computing in Chevy Case, Maryland, believes the carriers will try to set high license fees in Germany and the U.K. (which took in $33 billion in its next-generation wireless auction earlier this year) to account for "billions of dollars more for the new network infrastructure.

"Someone is going to have to pay for this, and that is going to be the customer who will be faced with higher tariffs and less innovative pricing (formulas)," Reiter said The next-generation services the winning bidders plan to offer, which include mobile wide-band data and video, will require new electronic equipment and software "that's probably not going to work the first time out either, which means equipment and software upgrades, another cost," Reiter said.

Multinational mobile users will have to absorb even more licensing costs when the U.S. conducts its much-delayed next-generation spectrum auction in March 2001, with the total bids exceeding that raised by Germany.

The winners in the first phase of the German next-generation wireless auction, which kicked off July 31, are E-Plus Hutchison, Group 3G, Mannesmann Mobilfunk AG, MobilCom Multimedia, T-Mobil (owned by Deutsche Telekom AG) and VIAG Interkom AG.

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