Dept of Finance agrees 3G licence prices

The Dept of Finance and the Office of the Director of Telecommunications Regulation [ODTR] have agreed the pricing of third generation [3G] phone licences.

Third generation mobile phones allow users to access the web through handheld or other mobile wireless devices.

Four licences will be awarded in Ireland.

Indications are that three licences will be set aside for the companies that are already mobile licence holders (Esat, Eircom-Vodafone and Meteor).

These are expected to be priced at £90m.

A fourth licence, to be awarded through a competition, will be priced at £40m.

Potential payments could see half of the cost being paid upfront with the rest in installments over three years.

This process may take nine months to complete and could bring in excess of £300m to the Government.

Nonetheless the impact of such purchases on the telecommunications companies themselves has caused major problems to-date, and is at best uncertain.

For instance, the £22bn paid for UK licences has laden European telecommunications companies with excessive debt and wreaked havoc with their share prices.

In France, the government discounted 3G price by 75% in an attempt to stimulate interest. Sonera "a Swedish company" surrendered their licence as it was unable to continue to invest in building a 3G network.

It is anticipated that other companies may do the same or consolidate in a tightening market or seek remedial government support.

Whereas investment in 3G infrastructure may be needed for telecommunications companies to grow market share and expand their services, the excessive and onerous capital cost of such expansion [of which a licence is only one component] may in fact be the downfall of several companies.