Six bidders remain for five Italian 3G licenses

The Italian government excluded Tu Mobile SpA from the competition for Italy’s five third-generation (3G) mobile phone licenses, reducing the number of contestants to six, the prime minister’s office announced last Thursday.

Tu Mobile is the second newcomer to be eliminated from the competition. Anthill SpA, from the southern town of Matera, was eliminated at the beginning of September for failing to provide evidence that at least one member of the consortium had a minimum of three years telecommunications experience.

Tu Mobile was excluded because it had failed to provide bank guarantees for 4 trillion lire (U.S.$ 1.8 billion), as required by the rules of the competition, the office of Prime Minister Giuliano Amato, said in a prepared statement.

The ministerial committee responsible for the allocation of the UMTS (Universal Mobile Telecommunications System) licenses confirmed that the remaining contestants — Omnitel Pronto Italia SpA, Telecom Italia Mobile (TIM) SpA, Blu SpA, Wind Telecomunicazioni SpA, Andala 3G SpA, and Ipse 2000 SpA – had all produced the necessary documentation and would be admitted to the competitive bidding stage, the statement said.

Competitive bidding is expected to begin on Oct. 19, Enzo Cheli, the chairman of the Telecommunications Authority, told reporters.

The government’s decision to exclude Tu Mobile was legitimate, but the company has asked its lawyers to consider the grounds for an appeal in the event that the competition procedures had unfairly favored some candidates over others, Tu Mobile Chairman Emanuele Castrignano said in a prepared statement.

The elimination of the two outsiders is unlikely to have a major impact on the bidding process, telecom analysts said.

“It’s not so much a question of how many competitors there are but of who they are,” said one Milan analyst, who asked not to be named. The two newcomers were likely to find themselves in the difficult position of spare-parts manufacturers pitted against the giant Fiat SpA automaker, he said.

“The exclusions will change the context of the competition and could mean that the bidding will be a little less fierce,” the analyst said. “Some time has passed since the competition in Britain and people have had a chance to reflect on the wisdom of investing in UMTS. If the contestants don’t bleed themselves white, that could be a good thing. I am not convinced that UMTS will prove to be profitable within a short period of time. This is something for the future, and it doesn’t get started for another three years.”

Paola Toschi, an analyst at the Banca Leonardo in Milan, agreed. “This could have an effect, but I think it will be limited. The companies that have been eliminated would not have added much to the competition,” she said.

Analysts expect the licenses to cost each operator at least 10 trillion lire. “The bidding will almost certainly reach a respectable figure,” Toschi said.