A mobile licence to print money

Chancellor eases back in chair, pats sleeping watchdog

Mobile phones heat up most people's heads, but for chancellor Gordon Brown, they heat up his hands as he rubs them with glee. The auction for third-generation mobile phone licences has gone haywire, shovelling billions of pounds of unexpected cash straight into the Treasury's coffers. It's no longer a question of who will win but rather will anyone have enough money left at the end to build a decent infrastructure and service. When the auction system was announced, The Register scoffed at the government's assertion that the setup would select the best companies. Now, with every licence costing more than was originally expected for the whole lot, you have to ask if the auction has done more harm than good to the future roll-out of mobile technology. Government e-minister Patricia Hewitt first announced the auction scheme in November last year, adding an extra licence for good measure, to bring it to five. The heads of Orange and Vodafone were not impressed. The auction was to start on 6 March 2000, and the Treasury reckoned it would get an average of £500 million for each licence - an overall total of £2.5 billion (secretly, though, it thought it would get £3 billion). The auction would end on 24 March, just three days after the Budget. A total of 13 bidders lined up against one another. On the day before the Budget, not one had dropped out and total bids stood at £2.43 billion. Brown made a hasty (and happy) reassessment of the situation and came up with an expected final revenue of £6.5 billion. That the Budget went on to throw huge sums of money at the government's two weak points, the NHS (£4.9 billion) and education (£1 billion) is perhaps a little bit too much of a coincidence. Confused, the newspapers explained the extra spending away through the new journalese of "stealth taxes". But such stealth figures didn't add up. As 24 March drew near, the mobile companies panicked that the DTI would bring the curtain down (thereby cutting them out of the future of UK telecommunications), and the licence bids shot up. At the end of play, all bidders were still in the game and the overall revenue doubled in just three days to £4.5 billion. The DTI decided to keep rolling. Now, almost three weeks on, there are still eight bidders and the cost of even the smallest licence is £3 billion. Vodafone and BT Cellnet are battling over the large licence - Vodafone's latest bid being £4.55bn. The total has surpassed £17bn. So, the questions are: What does the Treasury plan to do with all this money? (Will Vodafone be the saviour of the NHS?) The Treasury will receive half the bids immediately and the rest will be paid at a healthy rate of interest over ten years. A spokesman told The Register that the lump sum will be used solely to pay off debt. So that's no pre-election tax cutting and health spending then. Will the eventual winners be hampered by the fact that they have over-paid It is certainly going to be far harder than expected. Profit forecasts will have to be put back a few years and customer service charges will be higher than they would have been if the bids were lower. Is the eventual loser the consumer, and if so, what does the telecoms watchdog Oftel plan to do about it? Daft question really. An Oftel spokeswoman seemed confused with the concept of foresight. "Nothing specifically" is being done and don't hold your breath that it will (unless, of course, big-buddy BT loses the main licence and gets upset). Should this system be used in future? No. But when it yields ten times the revenue you expected, you know it will be. It remains to be seen whether UK firms retaliate like their US counterparts and refuse to hand over the huge sums once contracts are won. Check out the bidding for yourself at www.spectrumauctions.gov.uk

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