Regulator cancels mobile auction

An auction for mobile phone frequencies in the Czech Republic has been canceled after bids rose too high, prompting fears customers would pay heavily once services were launched.

The Czech telecommunications regulator ČTÚ will re-launch the auction under new terms after bids exceeded 20 billion Kč.

The auction, for 800, 1,800 and 2,600 MHz bands, would have resulted in the launch of Long Term Evolution (LTE) mobile services in the Czech Republic. LTE, a fourth-generation (4G) mobile technology, offers consumers faster download speeds than existing 3G services.

The companies taking part in the auction, launched in July, were Telefónica CR, T-Mobile Czech Republic, Vodafone Czech Republic and the private equity fund PPF Mobile Services, which would have been a new entrant to the market.

Pavel Dvořák, chairman of ČTÚ, reportedly said the value of bids should have been between 12 billion and 15 billion Kč and was concerned consumers would end up footing the bill for the high bids received.

The cancellation is "a significant setback" for ČTÚ, according to Matthew Marden, a telecommunications analyst at the market research company IDC. "It had been preparing and carrying out the auction for more than a year and a half when it canceled it, and Czech consumers are no closer to benefiting from a fourth mobile network operator or commercial LTE deployments on the spectrum it was auctioning," he said.

He said the cancellation looked particularly bad given the importance the organization had placed on bringing a fourth mobile operator to the market.

Reports have indicated Dvořák may not have his term in office at the ČTÚ extended in the wake of events. Michael Voříšek, also an IDC analyst, said it appeared the ČTÚ had made mistakes in how it had set the tender rules.

"I don't think the main problem is that the bids rose too high but that the result of the auction is in contradiction with what [the regulator] wanted. They wanted to award the licenses, and they wanted services to be rolled out fast," he added.

"ČTÚ absolutely has to get the auction right when it opens the process again. There have been enough auctions that have been successfully completed in other European markets to provide it with a roadmap."

The way in which bids rose strongly in the Czech auction mirrors the situation in the Netherlands, where a 4G auction that was concluded in December raised several times more than expected.

The total of 3.8 billion euros generated by the Dutch auction far exceeded an estimate from the authorities that it would raise between 400 and 500 million euros. By contrast, last month it was announced an auction for 4G mobile frequencies in the United Kingdom had raised less than expected, £2.3 billion (67.5 billion Kč), compared with a predicted figure of £3.5 billion.

Among the recent developments in the Czech mobile phone market was the launch in November of BLESKmobil, the country's first virtual mobile network operator (MVNO). BLESKmobil, part of Ringier Axel Springer, does not operate its own network, instead using that of Telefónica O2.

Daniel Bardsley can be reached at
business@praguepost.com