Swiss hang up on 3G licence auction

date: 20 November 2000

The Swiss Government postponed its third-generation (3G) mobile licence auction at the last minute on Monday after six bidders, including a unit of Hutchison Whampoa, pulled out of the race.

The withdrawals left five telcos competing for four high-speed Universal Mobile Telecommunications System (UMTS) licences at yesterday's auction.

Hutchison 3G Europe, along with Swiss cable television group Cablecom, Norway's Telenor and Deutsche Telecom's T-Mobile, withdrew from the auction at the end of last week in expectation of extremely high prices.

Although the government had set a minimum price of 50 million Swiss francs (about HK$219.98 million) for each of the four licences, it did not hide the fact it expected to get more than one billion Swiss francs per licence.

The five remaining candidates for the four licences were to be Swisscom, Orange, Diax, Sunrise Communications and Telefonica.

The trigger for the postponement of the auction on Monday appeared to be an announcement minutes before the start that British Telecommunications was selling its 34 per cent stake in Sunrise, a Swiss fixed-line and Internet provider, to TeleDanmark for £460 million (about HK$5.12 billion) in cash.

Danish telecoms group TeleDanmark, which increased its stake in Sunrise to 89 per cent, withdrew Sunrise from the auction as it intends to merge the company with its Swiss rival Diax.

Bidders condemned the Swiss regulator's decision to postpone the auction and to wait until December to decide its next move.

Swisscom was already planning legal action if Swiss authorities called a new UMTS auction.

Swisscom has a lot at stake, as last week it signed a prenuptial agreement with British mobile giant Vodafone. If Swisscom wins a Swiss 3G licence, Vodafone will take a 25 per cent stake in its business in a deal worth £1.8 billion.

The Swiss 3G auction had promised to be an exciting competition given Switzerland is a highly attractive mobile market with an affluent population of 7.3 million people and the highest GDP per capita in Europe.

Instead it is the third flop in a row, following the recent disappointments in Austria and Italy where licences equalled bidders in number.

Hutchison 3G Europe picked up licences at the asking price in Austria and Italy via its 51 per cent-owned subsidiary Andala.

Up until that point, telcos had chased licences with fervour, adopting desperate measures and paying huge prices.

They had also taken a gamble that consumers, who have already accepted higher mobile charges to fixed-line telephony, would pay dearly to access the Internet via their mobiles, even though wireless application protocol technology is unlikely to ever match the speed and quality of Internet access via PCs or television.

Hutchison Whampoa, which pulled of its German consortium after having won a licence, has been noted for its absence in the Swiss auction.

Hutchinson profited handsomely by selling its stake to its E-Plus Hutchison consortium partners, Dutch mobile operator KPN and Bell South, and is viewed by analysts as more interested in trading 3G assets than owning them.

"Hutchison is massively focused on making money," said Patrick Foulis at UBS Warburg.

"They are regarded with fear and trepidation in the market."

With Hutchison out of the Swiss race and unlikely to join the French auction, some suggest it no longer sees value in these licences

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