War on how to split Europe 3G networks

date: April 26, 2001 - source: FT

European governments are on a collision course over how much help to give struggling mobile phone companies as German operators prepare to split the cost of building third-generation networks.

Group 3G, a German operator owned by Sonera of Finland and Telefónica of Spain, on Wednesday revealed plans to save E1.5bn ($1.3bn) and 40 per cent of its operating costs by sharing much of its network with rivals.

The German regulator, RegTP, has encouraged operators to produce such proposals and is understood to be willing to take a sympathetic approach when interpreting rules originally designed to prevent anti-competitive collaboration between the six licence holders.

This is in stark contrast to the hardline position adopted by the UK government which argues that consumers benefit from competition between operators using independent network infrastructure.

Governments are under growing pressure to relax competition rules as the European telecommunications industry feels the impact of the E140bn cost of acquiring 3G licences. On Wednesday, Spain became the first country to change the licence conditions when it allowed operators to delay launch until June 2002 as a result of technical problems.

Spain's Science and Technology Ministry also said it would put forward legislation allowing them to re-use radio spectrum earmarked for 3G services for their existing 2G services.

The differences between member states are also matched by confusion within Brussels.

Mario Monti, the competition commissioner, signalled this week that network sharing might lead to serious competition concerns. But Erkki Liikanen, the telecommunications commissioner, has encouraged member states and telecommunications companies to consider it as a way of cutting costs for debt-stricken groups.

Governments are also under pressure from health and environmental lobbies. On Wednesday, Hans Snook, former chief executive of Orange, accused the UK government of "creating a crisis in our industry", by changing the rules on safety and the erection of masts since the auction of 3G licences.

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