Friday, October 01, 2004

Some foreign interest in Latvia's 3G/GSM auction?

A marketing research and consulting company, Ticon Latvia, is expected to report by the middle of October on the feasibility of holding an auction for Latvia's third GSM/UMTS licence. Latvia's prime minister Indulis Emsis has already jumped the gun on the report and said an auction will be held in 2005 in the interest of increasing competition in mobile services.
According to information provided to this blogger, the Latvian PM may have acted on preliminary information from the consultants, whose mandate was to interview "somewhat more than 10" Latvian and international companies. The researchers apparently got some favorable response.
It is said that French, German and Russian mobile operators have shown some interest. Orange and T-Mobile and Russia's NTS (so says one of the blogger's background sources) are mentioned as possible candidates.
More interesting speculation: the market survey report, either explicitly or through the data and operator viewpoints it compiles, may recommend splitting the third licence into an immediately effective third GSM licence and some kind of option or right or first refusal on UMTS. In other words, if XYZ Mobile buys Latvia's third licence, it can start GSM immediately, but also gets the exclusive right to activate its UMTS licence during a certain period, say two years, like the moratorium on new licences that came into effect after the abortive 2002 GSM/UMTS auction.
Ahead of what was widely termed a fiasco (the starting bid was set at LVL 7.6 million), Lithuania's Bite and Radiolinja showed some interest in the Latvian licence.
By some interpretations of the 2005 draft budget, Latvia hopes to get LVL 1.136 million in revenues from a UMTS licence. Nobody (not the Finance Ministry, not the Transport Ministry that oversees telecoms, nor the Public Utilities Regulatory Board, which would run the auction) seems to know where this figure came from.
Tele2's chief executive in Latvia Mats Tilly said his company would consider legal action if the terms of the third licence tender differed substantially from those Tele2 accepted when it bought a UMTS licence for LVL 5.8 million in 2002. Tilly was apparently upset by the assumption that the new operator would pay five times less. Latvian Mobile Telephone's (LMT) president Juris Binde is more philosophical, remarking that the price of things changes. Meanwhile, the odd man out, CDMA-450 operator Triatel is poised to launch 3G services in a limited part of the country by the end of October. So the third licence will actually be for a fourth operator.
Janis Lelis, the managing director of the Latvian Telecommunications Association believes that there is a potential untapped customer base of around 300 000 mobile users on top of the 1.2 million already using mobiles (the total population of Latvia is about 2.4 million). Even if three GSM operators split the newcomers evenly, Lelis thinks an operator with 100 000 customers would be viable, especially if the regulatory authorities enforce favorable interconnects and so-called domestic roaming (the newcomer can use incumbent networks until it builds its own).
Perhaps the hybrid GSM licence/UMTS option or first-refusal will prove to be the most viable when Ticon Latvia makes its expected report.

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