BT and Vodafone slug it out as bids for mobile licences approach £15bn

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The Independent Online

British Telecom and Vodafone AirTouch slugged it out yesterday in the Government's auction of next-generation mobile phone licences, as the total on offer rose by 10 per cent during the session to £14.34bn.

As Britain's two telecoms giants traded blows over licence B, doubts about the staying power of Telefonica gathered ground as the Spanish telecoms firm used two of its three waivers. In recent days, bidders exercising waiver rights have used the move as a last-gasp delaying tactic before withdrawal.

Analysts now believe the auction could be in its closing days. "We don't see it lasting more than a day or two," said Stephen Pentland, a partner with Spectrum, the consultancy. "The values being paid for licence A, the new licence, are far beyond what any business plan would support."

Yesterday attention focused on the battle for licence B, the biggest block of frequency on offer to the four existing mobile companies. Vodafone and BT took turns at upping the ante over yesterday's four rounds of bidding, with Vodafone prevailing yet again as the offer for licence B jumped by £630m during the day to £3.63bn.

For licence A, Telesystem International Wireless, a Canadian-based operator of mobile services, took pole position with a bid of £2.87bn. Last night, however, analysts questioned whether TIW could raise its bid much higher, given the company's market capitalisation of C$3.6bn (£1.6bn).

Not only does Licence A offer the most spectrum of any licence, it is also the only one reserved for a new entrant. Should Telefonica call quits, that would still leave NTL Mobile, backed by France Telecom, and US data giant WorldCom, which had the leading bid in the second-to-last round, in contention.

Yesterday NTL Mobile was in pole position for licence D, with a bid of £2.7bn. Orange and One2One, the third and fourth largest UK operators, kept their licence hopes alive; Orange was ahead for licence E with an offer of £2.59bn, while One2One led on licence C, bidding £2.54bn.

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