Auction Is Taxing for Mobile Firms

Article excerpt

Byline: TIM FREEBORN

THE Government is keen to project its 'new economy' credentials - but even keener to raise taxes. Auctioning the next generation of mobile phone frequencies looked a smart move. But the eventual winners will simply pass on the bill to users - denting the growth of the wireless economy.

In France and Spain the licences have been awarded free to operators who promised rapid rollout of services.

Consumers benefit, and business there gains a powerful 'first mover' advantage.

Our auction is managed by the DTI's Radiocommunica-tions Agency. In round one, the leading bids for all five licences came to under [pounds sterling]300m. In yesterday's 84th round the top bids tallied [pounds sterling]8.1bn. The four current network operators must stay in the bidding or see their businesses crash in value.

Outsiders, such as Nomura's Epsilon Telecom, have little to lose by bidding up prices. If the bids reach [pounds sterling]15bn, as seems likely, the cost of launching third generation networks (3G) will have doubled. …