Банкеръ Weekly

Briefs

QUESTIONS REMAIN ABOUT THE POINT TO MULTIPOINT LICENCES

The tender for two A class point to multipoint telecommunication licences (those providing broader frequency resource) organized by the Communications Regulation Commission in October was won by Cable Net and Trans Telecom which reached a price level slightly above BGN5MN. Even more fruitful was the bidding for B class licences. It took almost a week and the price grew up to the record BGN6.172MN from BGN672,000. Eventually, the three lower class permissions went to Orbitel, Nexcom and the Bulgarian Telecommunication Company (BTC). That provoked the experts to comment that the former state monopolist BTC would now face strong competition on the part of the alternative telecoms. Both the Communications Regulation Commission and the Government were satisfied with the situation, too, expecting to collect over BGN28MN for the treasury due to the five licences. That didn't happen, however. On December 6, a few days before the permissions were officially delivered, it turned out that it all has been reckoning without the host.
The Orbitel management declared officially on December 2 that they gave up their licence. They said the frequencies they competed for were not suitable for the PMP wireless technology and appeared too expensive.
Telecommunication experts commented for the BANKER weekly that the reasons of the alternative telecom were ridiculous. They added that the 3.5 megahertz frequencies offered by the CRC met the standards all over Europe and therefore were absolutely applicable in Bulgaria. A far more reasonable motive for Orbitel's withdrawal is the change of ownership. Last week the company was acquired by the Hungarian Magyar Telekom which has Deutsche Telekom as its majority owner. Obviously, the plans of the new owners do not include development of a technology such as the point to multipoint one which is still beginning to grow.
However, the big surprise came from BTC on December 5. The former state-owned telecom announced that it gave up its licence because of suspicions about discrepancies with the tender rules allowed in the A class licence procedure. The changed market conditions following the appearance of the third mobile operator, Vivatel, is another reason. According to BTC, this led to a decrease in the prices of mobile services which enabled the application of other technological solutions, too.
In fact, there is an explanation for BTC's actions. The company took part in the bidding just in order to inflate artificially the price of the licences which allow alternative telecoms to gain access to the end consumer, too. At that high price level (which they hardly expected) the competitors who are still learning how to walk will be forced to shrink their investment programs. In turn, this will have an effect on their market entry.
What we said happened later. BTC which was let to take part irregularly made the entry of alternative operators as hard as possible, Nexcom Marketing Manager Milko Georgiev commented for the BANKER weekly.
The participation of operators of national importance (BTC, Mobiltel and Globul) in the tenders is not to be misjudged. It became clear once again that they had the financial ability to influence the licence distribution.
From an economic point of view, we should not let the operators of national importance take part in the bidding, but the law obliges us to do so. Still, it is a matter of building a new market and not of development of one that is already created, the CRC Chairman Georgi Alexandrov told the BANKER weekly.
The consequences from this decision will be known next year. For the present, Mobiltel agreed with taking the licence released by Orbitel by paying the amount at which the telecom withdrew, BGN6.1MN. Whether and when the company will profit by the chances it offers is another question. One should not forget that the first GSM operator invests quite significant resources in the development of its 3G mobile network and will hardly make additional efforts to use the point to multipoint opportunities immediately.
What will happen with the third free licence is a much more curious question. There are two possibilities - either a new tender to be announced or the licence to be given to Carrier BG which gave up bidding for it when the price reached BGN2.5MN.
I personally think that a new tender must be announced. However, the final decision is to be taken by the Communications Regulation Commission as a collective body, the CRC Chairman Georgi Alexandrov said. In this case CRC will have to choose the lesser evil. It seems obvious that if a new bidding is announced, the price attained will be much lower than the current one. It may even fall below the BGN2.5MN offered by Carrier BG. But if the licence is given without a tender, that may provoke reasonable protests on the part of the other participants who were forced to pay a much higher price for the permission.
Eventually, nobody forced the representatives of the companies to bid. They decided how far they could go by themselves, Georgi Alexandrov added.
On the other hand, Nexcom paid more money for the B class licence which gave it more limited possibilities compared to those given by the higher class to Cable Net and Trans Telecom.
Right now, the only indisputable licence is the one that we own. It is not subject to legal proceedings and the time for an appeal expired. As to the organisation of another tender, it may happen no sooner than the middle of next year when we'll already have a working network, Milko Georgiev from Nexcom said.
In fact, this is when it will become clear whether BTC's monopoly will finally fall. Only then will consumers be able to rely on telecommunication services of higher quality at a lower price.

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