Only three firms submitted bids for four third generation mobile phone licences yesterday in a contest that will fail to raise the Government's target of €394 million in fees.
Vodafone and O2, parents of the two dominant Irish mobile firms, both applied for licences, as did a new entrant, Hong Kong-based Hutchison Whampoa. Meteor, the third existing mobile operator majority owned by US firm Western Wireless, did not bid raising questions about the firm's commitment to the market.
Third generation mobile technology enables mobile devices to transfer data at very high speeds - up to 40 times faster than currently available. It should enable firms to introduce a range of innovative applications such as video conferencing, wireless internet and location specific information.
Competitions to award licences to operate this technology have raised €120 billion over the past two years throughout Europe. But the recent downturn in the telecoms and technology sectors has caused analysts and firms to question the hype surrounding this technology.
Although the "beauty contest" competition here set relatively low per capita fees of €103, compared to a British auction which produced fees of €621, the mobile firms Orange and Meteor both said the fees were still too high.
The cost of building extensive third generation networks, estimated by analysts at €500 million here, is thought to have deterred potential bidders in the small Irish market. Most analysts believe the population here can support just three mobile firms.
A spokeswoman for the telecoms regulator, Ms Etain Doyle, said the office would have preferred to have seen more bids for the licences and would deal with the situation in due course. Ms Doyle could re-issue licences not taken up during the competition to other parties but it is unlikely that she could offer them at cheaper prices than those paid by existing licensees.
Mr Pete Quinn, a Western Wireless executive, said Meteor had prepared a bid but did not submit it because it was "an opportunity that it could pass up". He said the firm may seek to become a virtual operator, depending on the outcome of the competition. A virtual operator would be able to offer services without owning a licence or a third generation network by piggybacking on another company's network.
Under the rules of the Irish competition, bidders who allow virtual operators to access their networks will be awarded extra points in the evaluation process for a single type A licence on offer. All three bidders have applied for the type A licence, in part because it costs just €51 million compared to a €114 million price tag on each of the three type B licences.
All the licences are for 20 years but they have differing terms, with the single A licence providing 80 per cent population coverage and potential extra spectrum, and the three B licences giving 53 per cent coverage and slower roll-out conditions.
Bidders were able to bid for a B licence as well as an A licence, Both Vodafone and O2 chose to submit bids for each which raises the possibility that Hutchison, could miss out on a licence if it does not obtain the single A licence on offer.
But if Hutchison's bid for the A licence is judged to be the best on technical and performance criteria, the company's entry into the Irish market would stimulate additional competition. The firm is a strong supporter of third generation services and holds a majority stake in companies with a licence in seven states. It has formed a joint venture with Japanese firm NTT DoCoMo and KPN Mobile, which has pledged to bring the popular I-mode service to Europe.
This service is extremely popular in Japan notching up some 50 million users in just a few years.
