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ComputerWire: IT Industry Intelligence

In a move of immense significance for Europe's cash-strapped telecoms sector, the Italian government is preparing to enable mobile operators to trade in bandwidth,

Rik Turner writes.

Communications minister Maurizio Gasparri last week told the parliamentary committee on telecoms and transport that he plans to make it possible for mobile license holders to transfer the right of use frequencies to other companies.

Italy is now set to become the first EU member country to permit such trading after the Union itself adopted legislation that makes provision for such business as from July 2003. On one hand, this move is good news for companies that hold 3G licenses, particularly the new entrant group that includes Hutchison Whampoa Ltd, because it should help them to amortize network build-out costs prior to having a large enough number of subscribers to occupy all its licensed spectrum.

On the other hand, secondary trading in mobile bandwidth will establish a real market value on the commodity. If other European governments follow Italy's example, new entrant license holders that are already under a cloud with the financial market will have to reduce the book value of the licenses on their balance sheets via write-downs. Italy raised only 12.2bn euros ($11bn) with the sale of its four 3G licenses last year, but Germany had earlier raised a massive 50.5bn euros ($45bn), and the UK 38.5bn euros ($35bn), so if either of them allow secondary trading, the ramifications are potentially huge.

The signs are that at least some national administrations are preparing to enable such transactions. In the UK, a spokesperson for the Radio Communications Agency said the government is moving toward permitting secondary trading after an independent review of spectrum management carried out by a leading academic with expertise in the subject had advocated such a measure. He added that the RCA would shortly sponsor a public consultation on the subject.

The most reticent government so far has been Germany's, but with the EU okaying secondary trading and the authorities in other major economies moving to permit it, it can only be a question of time before Bonn follows suit. The implications are great here, not only because the volumes paid were so great, but also because Germany has not one but two new entrants, namely Group 3G comprising Spain's Telefonica SA and Finland's Sonera Oyj and the group that includes MobilCom AG and France Telecom SA.

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