UMTS licence bidding: The beauty and the booty

Across Europe, the race to allocate spectrum for the roll out of services based on third-generation (3G) mobile UMTS technology is causing sparks to fly. And with good reason.

A recent twist to the plot is France's 'beauty contest' approach to awarding licences. It's in stark contrast with the auctions that raised billions of euros in Germany and the UK, but threatens to exclude certain companies, this time for non-financial reasons.

Meanwhile, as silicon.com reported yesterday, experts are pouring scorn on claims by German mobile reseller Mobilcom that it will break even within five years, despite spending E8.4bn (£5.1bn) on a UMTS licence. All manner of analysts and credit rating agencies have voiced concerns about the sums that have been paid in Germany - not to mention the UK.

And in Spain, which gave its incumbent operator a boost overseas by spurning a costly auction at home, politicians are allegedly upset they won't be coining in billions in licence revenues. So they're considering new taxes on the mobile operators.

The UMTS auction circus will be stopping in Italy next - a country of mobile phone lovers which claims it probably won't raise as much as Germany or the UK, but which still scrapped plans for a beauty contest when it saw the UK's spring time auction.

And despite the worrying, it's quite possible mobile operators will have the last laugh. New business models will develop and these operators may well become our default gateway to the internet. Already we've seen the KPN/NTT DoCoMo dream team pay Hutchison Whampoa a premium for part of its UK licence, just months after the widely derided auction.

Public and private spats simply show how important and difficult it will be to get 3G right. Which companies and countries will succeed is anyone's guess.

All we can safely say is that when powerful corporations and governments meet head-to-head, it's rarely pretty. And that applies just about everywhere.