Conduct of U.K. 3G Auction Challenged

LONDON (03/02/2000) - British Telecommunications PLC (BT) has expressed concern over the conduct of an upcoming auction of licenses to operate third-generation (3G) mobile phone networks in the U.K.

BT sent a letter to the Department of Trade and Industry highlighting what the company sees as the potential problems of quickly merging telecommunications companies inadvertently applying for more than one license, which would contravene the rules of the auction. It said it is concerned that the government may have changed the auction rules, and that one newly-consolidated company may end up with two licences.

"We wrote the letter a week and a half ago outlining our possible concerns," BT spokesman Simon Gordon said in a telephone interview.

The auction, which is being run by the Radio Communications Agency (a division of the Department of Trade and Industry) is set to begin on Monday, March 6, and expected to last several weeks.

The five licenses, granting use of blocks of radio spectrum to operate 3G services, are being pursued by 13 bidders, according to the Department of Trade and Industry. Under the rules of the auction, which is run as a modified version of the U.S. Federal Communications Commission's auctions, companies that are connected in any manner cannot bid for separate 3G licenses.

BT is specifically worried by the possibility that mobile operators Vodafone AirTouch PLC and Orange PLC, which have bid for licenses separately, will become connected by virtue of Vodafone AirTouch's planned acquisition of Orange's parent company, Mannesmann AG.

However, the company said it is not seeking to delay the start of Monday's auction.

Nor will it press for legal action such as a statutory appeal or judicial review, unless it sees a need to, the company said.

"We are going to reserve our action," Gordon said.

Mannesmann has offered to divest its interests in Orange in order to settle any antitrust issues that may keep the European Commission from approving the merger. The EU will make an initial ruling on the planned acquisition by the end of the month. [See "Vodafone Orange Offer Unlikely to Stop EC Inquiry," Feb. 9.] The U.K. government has already ruled that the four existing mobile operators, BT, One2One Personal Communications Ltd., Orange, and Vodafone may not bid for the licence with the largest amount of spectrum. That licence is being reserved to encourage bids by one or more new mobile companies, the Radio Communications Agency said in a statement released last month.

The 13 qualified bidders are 3G Ltd., BT, Crescent Wireless Ltd., Epsilon Telecommunications PLC, NTL Mobile Ltd., One Tel Global Wireless Ltd., One2One, Orange, SpectrumCo Ltd., TIW UMTS (UK) Ltd., Telefonica UK Ltd., Vodafone and WorldCom Wireless (UK) Ltd.

Reserve prices for the five licences total 500 million pounds (US$793 million), the Radio Communications Agency said.

BT, in London, can be reached at +44-207-356-5000, or at http://www.bt.com/.

The Radio Communications Agency, in London, can be contacted +44-207-215-5000, or at http://www.radio.gov.uk/. The auction Web site is at http://www.spectrumauctions.gov.uk.

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More about British TelecommunicationsBT AustralasiaCrescent WirelessDepartment of Trade and IndustryEpsilon InteractiveEuropean CommissionFederal Communications CommissionMannesmannNTLNTL MobileOne2OneOne2One Personal CommunicationsOne Tel Global WirelessTelefonicaUMTSVodafoneWorldCom

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