Commission concludes that third Czech 3G licences not an aid

December 21, 2006

The European Commission has decided under EC Treaty state aid rules that the lower price at which the third 3G licence was granted by the Czech Government in 2005 did not involve state aid within the meaning of the EC Treaty. There was no discrimination against the winners of the first two licences in 2001.

Competition Commissioner Neelie Kroes commented: "The Commission is satisfied that the Czech authorities have not favoured the winner of the third 3G licence. We have concluded that the lower price with respect to previous 3G licences simply reflects the dramatic change in market conditions between 2001 and 2005."

In 2001, Eurotel (controlled by Telefonica since 2005) and T-Mobile, two of the three GSM operators in the Czech Republic, were each awarded a 3G licence at a fee of CZK 3.5 billion and CZK 3.9 billion respectively (€105 million and €115 million). No other company was interested in the remaining two 3G licences at the conditions then set by the Czech authorities. In 2005, the Czech government awarded the third 3G licence to the remaining GSM operator, Oskar (now part of Vodafone) at a fee of CZK 2 billion (€66 million). Eurotel and T-Mobile subsequently complained to the Commission that the difference between the fees for the first two licences and for the third licence constituted state aid in favour of Oskar.

The Commission found that the Czech authorities had applied the same procedure in 2001 and 2005 and that the conditions attached to the three licences are similar. The Czech authorities had moreover applied the same methodology to determine the level of the fee for all licences. In particular, both in 2001 and 2005, the Czech Government had used a study carried out by the same consultant, which compared the prices for 3G licences all over Europe. The lower estimated level of the fee for the third Czech 3G licence reflected the fall in licence prices in Europe during the last few years. This fall is a consequence of the dramatic decrease in 3G revenue forecasts in recent years.

As there was no discrimination, neither in terms of procedure nor in terms of the establishment of the licence fee level, the Commission has concluded that there was no state aid involved.