Will auction of frequencies bring cheaper mobile calls?

The Czech telecommunications authority has moved to open up the country’s mobile calling market for new players. It is auctioning the frequencies of 800, 1800 and 2600 MHz, which is expected to fetch around 7.4 billion crowns. The bidding, which opened last week, will close on September 10, and the winners should be announced by the end of the year. If the auction is a success, a new mobile phone operator could possibly bring down the high prices of mobile calls. But besides the existing mobile network operators, few new players have expressed interest in taking part.

Martin VyleťalMartin Vyleťal In this edition of Marketplace, I discussed the auction with Martin Vyleťal from the internet- and telecommunications- focused website lupa.cz.

“The frequency of 1800 MHz is usually used as GSM, that is, for voice and data services such as GPRS and Edge while the 800 MHz frequency is usually used for high speed data. I think that the latter one would be the most interesting one for the current operators because they can use it for the LTE technology providing high-speed internet connection.”

Why are the Czech authorities auctioning the frequencies in the first place?

“The frequencies are being auctioned because they no longer used to broadcast analogue TV signal after TV stations switched to digital broadcasting which requires smaller band sizes than analogue broadcasting. There are also economic reasons – the Czech government could get at least 7.4 billion crowns which I’m sure will come in handy in these difficult times.”

Are the frequencies auctioned separately or in one package? In other words, do you expect that one bidder will take all or will it be split among several firms?

“There are several packages so it’s possible that it will be sold separately. But it’s also possible that one company could buy more packages.”

One issue is the LTE technology, and another is whether the auction will lead to the emergence of a fourth mobile network operator. What are the conditions for those interested in running a new mobile network?

“I have heard a lot of complaints but I think we really should wait for the auction. Only then we can see if the conditions were interesting for new players or not.”

Do you expect the arrival of a new operator?

“It’s possible but I’m not sure if a new mobile phone operator will be able to offer better prices than the current ones. Anyone building a new network will have to make big investments, and will probably need to pay back the investors. And that will be difficult without reasonable revenues.”

There have been constant complaints over the years that mobile calling in the Czech Republic is more expensive than in other countries. Some people say the operators invest less into the networks than they do elsewhere. Isn’t that a solid guarantee of revenues?

“I think the problem is in the competition. On the Czech market there are three operators and there is no competition among them that would push them to offer reasonable prices to the end users. In the corporate sphere, however, the competition is much bigger and the operators do come up with competitive prices. So if a new operator comes, we will probably see some changes.”

Photo: Gerhard Simader / Stock.XCHNGPhoto: Gerhard Simader / Stock.XCHNG All three existing operators – Telefónica, T-Mobile and Vodafone – have expressed interest in the auction but few new players did, perhaps with the exception of the financial group PPF. Is this the reality or do you expect the situation will be different in September when the bidding closes?

“I think things will be different in September because we don’t really know how big the interest actually is. As far as I know, no firm has publicly declared its interest but there is speculation about companies such as PPF, as you said, and Dial Telecom or GTS Novera, and even some Chinese and Indian companies which would like to enter the European market… So we will see as soon as all those firms come up with their bids.”

Coming back to the relatively high calling prices – where do you think the problem is? Are the regulators not doing their job properly?

“I don’t think it’s solely the authorities’ fault. What could help, however, is that if the regulators pushed the current operators into opening up their networks for other companies which could provide their services using the existing networks. I’m talking about virtual mobile operators that don’t have to invest in setting up their own networks and instead use the existing ones.”

The telecommunications authority is accepting bids until September 10. When will it be clear whether or not a new operator will emerge on the market, and will Czechs be able to use the LTE technology?

“It will depend on many factors. Right now, the process is much slower than originally expected, and I’m not sure when it will be finalized. As far as the possible new mobile phone network, it should cover 20 percent of the territory in two years’ time. When it comes to LTE, the existing operators said that if they are successful in acquiring the 800 MHz frequency or some part of it, they will be deploying the technology as fast as they can. That means that we could see first cities and locations covered with the LTE technology as early as next year.”