Mobile auction marred by row
Sunday 30 April 2000
A row has broken out among the winners of the new generation of mobile phone licences about a loophole which may allow Vodafone a £400m advantage over its rivals.
At least two of the other successful bidders for the licences are understood to have lodged a protest with the Department of Trade and Industry, which oversaw the auction.
Their complaint centres on the fact that Vodafone is not allowed to take possession of its licence until later this year when it disposes of Orange, the other mobile phone operator it acquired through this year's merger with Mannesmann.
Since Vodafone will not have to come up immediately with its outlay - £5.96bn for its own licence and £4bn for that of Orange - it will have the opportunity to earn up to six months of interest on almost £10bn. At current rates, that could be worth about £400m.
By contrast, the other successful bidders - One2One, BT and TIW, a Canadian consortium backed by Hong Kong conglomerate Hutchison Whampoa - have to stump up their cash in the next week.
A spokesman for the DTI said: "The rules are very clear. Orange has to be demerged before the licence can be awarded." It is understood that although the complaints have been lodged with the DTI, Trade Secretary Stephen Byers is unwilling to change the rules.
The auction of the licences, which confer extra space for network operators, has been an enormous success for the Government. The bidding battle, which was only expected to raise about £5bn, finished last Thursday with the five successful parties pledging a total of £22.5bn.
However, the Treasury has agreed to spurn the opportunity to go on a pre-election spending binge and has said the cash will be used to pay off part of the National Debt.
The demerger of Orange, which is obligated by the rules barring one company from owning two mobile phone licences, is expected to proceed in the autumn. Hans Snook, the chief executive of Orange, is calling for the company to be floated, but there is speculation that Vodafone will opt for a trade sale.
Several operators, including Holland's KPN and France Telecom, have already expressed an interest in acquiring Orange. However, neither a float nor a trade sale would permit Orange to be disposed of within much less than six months.
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