Telekom bows out of French auction

date: 25 November 2000

Having paid huge amounts for licences across Europe, the company is now understood to want to concentrate on the markets in which it already has a presence.

It means the four licences on offer are set to be pocketed by four French consortiums.

Low participation in the French contest was blamed on the amounts already committed elsewhere, as well as an expectation that the French government would favour domestic bidders.

June licences

The French government plans to award the four licences next June.

Under the so-called beauty contest system, the government gives licences to the company with what it regards as the best plans, as opposed to the highest bidder.

With just four contestants, the French government is now set to raise 20 billion euros.

That is more than would have been raised if there had been just four bidders in an auction of four licences, although other companies may have taken part in a competitive auction.

"Everyone was saying France was making a big mistake going down the beauty contest route but now they're assured a big chunk of money whereas with only four candidates, an auction would have gone to peanuts," an analyst at a European investment bank said.

Fluctuating costs

Problems may arise if the proposals are not of a high enough quality to be awarded the licences.

Three of France's existing mobile phone operators are expected to win the licences.

France Telecom, with its Itineris network, Cegetel SFR, owned by Vivendi and Bouygues Telecom, a unit of Bouygues are all bidders.

Now that Deutsche Telekom has withdrawn from the contest, the fourth licence is expected to go a consortium of Suez Lyonnaise des Eaux and Spain's Telefonica.

"This is good news for Suez and Telefonica. There are two months before the deadline but the chances of another candidate coming in now are slim," one analyst said.

T-Mobile - Deutsche Telekom's mobile subsidiary - was the highest bidder in the German mobile auction in August, paying $7.8bn for its licences.

The amount raised by licence auctions has varied widely across Europe.

The German auction raised 50.5bn euros ($46.1bn), the UK auction raised £22.5bn ($35.4bn) but the Dutch auction raised just $2.5bn and Italy's licences went for $10.2bn.

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