Mobiles auction ends with Hutchison taking newcomer's licence for £4.4bn

Canada'S Telesystem International Wireless (TIW), with powerful financial backing from Hutchison Whampoa, the Hong Kong conglomerate, yesterday emerged as the surprise winner of the next-generation UMTS mobile phone licence reserved for a new entrant, with an offer of nearly £4.4bn.

With TIW securing licence A, that left Vodafone AirTouch, which bid £5.96bn, with licence B, which offered the most spectrum capacity to an existing operator. British Telecom and One2One prevailed for licences C and D with respective offers just over £4bn, while Orange won licence E, bidding almost £4.1bn. In total, the auction raised almost £22.5bn for the Treasury - over seven times the estimates.

Canning Fok, managing director of Hutchison Whampoa, said: "We we want to build the best system in the UK. This will be the latest technology." He also shrugged off the expense of the licence: "We believe this business will be more valuable than a second-generation GSM business."

Although TIW will be the official licence holder, its British subsidiary will set up a joint venture with Hutchison receiving a 90 per cent stake. In turn, that joint venture, in which TIW holds 10 per cent, will finance the licence purchase and an expected £5bn investment to develop the country's fifth mobile phone network. The joint venture company will own all of licence A's network capacity.

Hutchison Whampoa, controlled by billionaire Li Ka-shing, among Hong Kong's richest businessmen, is no stranger to Britain, having bankrolled Orange before selling out its remaining 45 per cent interest in November when Mannesmann bought the number three UK mobile group for £20bn. Hutchison's profit on the Orange sale topped £9bn and earlier this year it paid C$150m (£64m) for a 5 per cent stake in TIW.

TIW gained the upper hand when NTL Mobile, a joint venture of the UK cable operator and France Telecom, withdrew yesterday. "We reached a point where other ways of doing this looked more attractive," said a spokesman, who added that NTL would still look at ways to offer mobile services to its cable customers.

A relative unknown, TIW is based in Montreal and listed on the Toronto stock exchange with a market capitalisation of C$3.5bn. In addition to operating the Dolphin mobile radio network in the UK, TIW has interests in networks in Romania, Brazil, India and China.

Bruno Ducharme, president and chief executive of TIW, said the company's surprise victory here opens the door to further next-generation mobile licence bids in France and Germany, possibly in partnership with Hutchison. Mr Ducharme justified the high licence cost, noting: "Mobile is where fixed-line telephony was five or six years ago [before the internet]. [Mobile will become] a completely different business than it is now."

Other mobile executives echoed those views. Hans Snook, chief executive of Orange, said the licence price would appear cheap within two years as the full potential of multi-media and e-commerce services became apparent. "People are going to be using wirefree devices as electronic wallets," Mr Snook said. "When that happens, the opportunity to take just a tiny bit of transaction revenue from the transactions generated [over mobile phones] will create a huge revenue opportunity."

BT, meanwhile, criticised Vodafone's £5.96bn bid for licence B. It said the extra spectrum capacity gained by Vodafone at nearly £2bn was worth only £400m than the lower capacity licences. The UK's biggest network operator, however, remained bullish. "If you look back in history, almost every forecast in this industry has been exceeded," said Tim Harrabin, who headed Vodafone's bidding team.