Czech Cabinet, meeting yesterday, seems now to be favoring an auction as a way of allocating Czech UMTS licenses. There has also been the possibility of the government awarding the licenses in a beauty contest or directly allocating them to existing cellular operators, but the need to find sources of revenues for next year’s budget is pushing the Cabinet towards an auction. It seems that an official decision on the method of allocation will be made soon, and based on press reports around yesterday’s Cabinet meeting, we consider an auction probable.
The licenses will likely be awarded in 2001. According to an unnamed official from the Ministry of Transport, four licenses should be awarded. If confirmed, this would be an important development, since the original proposal by the ministry envisaged just three licenses, which would have made life easier for the three incumbent cellular operators. The ministry official estimated CZK 30 bil.-36 bil. in potential revenues coming from the UMTS auction (implying CZK 7.5bil.-9.0 bil. for each); the opening price in the auction is expected to be set at approximately CZK 5 bil. per license.
Telecom stocks’ reaction could be negative, since their cellular subsidiaries would have to pay more for the UMTS licenses if an auction is indeed planned, and if four rather than three licenses are awarded.
The three cellular operators in the Czech Republic are EuroTel (51% owned by Cesky Telecom), RadioMobil (51% owned by Ceske radiokomunikace, though the latter will be diluted to 39%), and Cesky Mobil (controlled by TIW).