Greece causes stir with 2G spectrum re-auction

The Greek mobile market is in a spin this week after national regulator the EETT issued a proposal for the re-auctioning of GSM spectrum licenses which are due to expire in 2012. The move is controversial because it is an unusual renewal process, but also because the authority has set reserve prices at more than double the European average.

The obvious conclusion is that the Greek Government wants to use  the auction process to squeeze as much cash as possible out of the market’s operators in the face of the country’s sovereign debt crisis. A reserve price of €46.6m for each 5MHz block in the 900MHz GSM frequency band has been called “excessive” by one operator.

But one person close to the situation also suggested there are machinations at work to ensure ex-state owned incumbent Cosmote – seen as the only nationalistic choice by Greek citizens whose alternatives are Vodafone and Weather owned Wind Hellas – gets its hands on some valuable 900MHz spectrum.

As it stands Cosmote owns 25MHz of 1800MHz spectrum, while Vodafone and Wind hold 10MHz apiece of 900MHz spectrum, which has greater range. It is this 900MHz spectrum that will go under the hammer first. The reallocated spectrum would also be awarded on a technology neutral basis, giving operators the opportunity to deploy 3G or any other technology in the 900 band.

Commenting on the draft tender document made available this week, Nassos Zarkalis, CEO of Wind, said: “The approach used to set the price for the renewal of mobile spectrum is driven solely by short-term revenue gains and disregards the need for Greece to create a positive investment climate.  This sends the worst signal possible to international investors as they weigh up the pros and cons of bringing their capital and expertise to our country.”

It has been suggested by Stefan Zehle, CEO of spectrum auction specialist Coleago Consulting, that the operators could boycott the auction and choose not to bid in order to protest against the pricing. A similar situation arose during the French 3G allocation in 2001 when, at the time, the legal framework for auction did not exist in France. The French government fixed the price at a high level, based on the amounts that were paid for 3G licences in the UK and Germany and while SFR and France Telecom bought a 3G licence, Bouygues Telecom refused. The government wanted to preserve at least three operators in France and was forced to substantially reduce the price of the 3G spectrum licence.

In Greece, there is, theoretically at least, the potential for new entrants to come into play during the auction process, although the state of the country’s economy should be enough of a deterrent.