German mobile auction likely to top UK with £30bn bonanza

Expectations are growing that the amount Germany will raise from its mobile licence auction will top the £22.5bn raised in the UK, again sparking controversy over how to spend the windfall.

Expectations are growing that the amount Germany will raise from its mobile licence auction will top the £22.5bn raised in the UK, again sparking controversy over how to spend the windfall.

Analysts are speculating that Germany's bids could top £30bn The German telecoms regulator is due to announce today the identity of the companies to bid for the new licences to operate video and so-called "always-on" services to cellular phones.

With eight companies having declared their intention to bid, the auction promises to be at least as heated as the one which concluded in the UK last week. Analysts say offers are likely to top the £4.5bn average reached in the UK's bidding war. Up to six next-generation UMTS licences are going to be offered.

Several of those who have already declared their hands lost out in the bidding for the UK licences, such as MCI WorldCom and two of the three partners in a three-way joint venture between Telefonica of Spain, Britain's Orange and Sonera of Finland.

Deutsche Telekom and Mannesmann - now controlled by Vodafone AirTouch - are leading the domestic field. The pair already control about 70 per cent of the domestic German mobile phone market.

British Telecom is represented through its 45 per cent stake in Viag Telekom, its Munich-based joint-venture partner, while France Telecom is bidding via Mobilcom, where it holds 28.5 per cent. Mobile operator E-Plus, which is partly owned by KPN, the Dutch telecoms giant, will also bid.

Germany is seen as potentially Europe's most attractive market because of its scale and the relatively low penetration of existing mobile services. The penetration rate is only 32 per cent, leaving plenty of scope for third-generation services to win more customers.

The cellular phone industry has raised concern about the prospect of UK-style auctions around Europe for new mobile licences. Although taxpayers may welcome the windfalls, doubts have been expressed about the ability of some bidders to make profits from services given the amounts they have pledged up front to governments to win the licences.