Debitel pulls out of 3G auction

Debitel, the mobile telephony service provider controlled by Swisscom, on Friday pulled out of the German auction for third generation licences – a move that promises to speed up the result of bidding when it resumes today.

The withdrawal, after two weeks and 127 rounds of bidding, leaves only six contenders competing for four to six licences. They must secure either two or three of the 12 blocks of spectrum on offer to gain a licence, the final number depending on how many blocks fall into the same hands.

“We had long anticipated that Debitel had the weakest resolve. What happens now really depends on whether E-Plus, Germany’s third-largest operator, goes for two or three blocks,” said Fanos Hira, wireless telecommunications analyst at Bear Stearns.

T-Mobil, the mobile arm of Deutsche Telekom, and Vodafone-owned Mannesmann, which together control 80 percent of the German market, are expected to gain three-block licences because of their higher need for spectrum.

Should E-Plus – controlled by KPN and Hong Kong’s Hutchison Whampoa – aim for two blocks, this would leave another three licences to be shared between itself and the other three contestants. Should it go for three blocks, however, the battle could extend for a few days.

“I think we are still far from the pain thresholds of most of the remaining players,” said Jo Oliver, analyst at Lehman Brothers.

The other bidders still in the race are France Telecom-backed MobilCom, Viag Interkom, backed by British Telecom and Eon, and Group 3G, which groups TelefA3nica of Spain and Finland’s Sonera.

By the close of bidding on Friday, the highest offers totalled E31.5bn ($28.6bn), breaching the bottom end of analysts’ forecasts for total proceeds.

The Finance Ministry has pencilled in much lower proceeds of E10.22bn in this year’s budget and said it would use the cash to reduce debt. But the Munich-based Ifo economics institute expects proceeds of E45bn, which would be enough to wipe out this year’s budget deficit. Mr Oliver anticipates the auction will yield up to E55bn. Reuters