Vodafone may be excluded from taking up the third-generation mobile phone licence it was awarded, after failing to pay €44.4 million to the telecoms regulator yesterday.
Amid increasing concern about the value of third-generation mobile investments in Europe, Vodafone, the largest mobile company in the State, did not accept the licence by the deadline of midnight last night.
In contrast, Vodafone's rival in the Republic, O2 Ireland, confirmed it had accepted a licence before the deadline expired and paid a first instalment of €44.4 million.
O2 will now work to build a network giving 33 per cent coverage of the population by June 2006.
It will pay the regulator €114 million phased over 15 years, similar terms to those offered to Vodafone.
Third-generation mobile technology enables companies to offer a range of multimedia and video services at high speeds to mobile phones and handheld devices.
Initially viewed as licence to print money, mobile firms spent more than $100 billion acquiring licences in Europe. However, following the technology downturn and technical hitches, many firms have turned sour on their investments.
Vodafone, which was formally offered a licence 15 days ago by the telecoms regulator, said it would ask Ms Etain Doyle for a one-month extension to the tender.
"Having not indicated acceptance nor made the necessary payment by the initial deadline of August 14th, will request a further extension as provided for under the process," the firm said in a statement.
A Vodafone spokeswoman said the firm remained committed to introducing third-generation technology in the Republic. But informed sources said Vodafone was still considering its options and may decide not to proceed with plans to develop an Irish third-generation mobile network.
The massive costs of building out a third-generation network and a slew of technical difficulties with the new technology have caused several firms to pull out of similar investments in Europe.
Finnish firm Sonera recently liquidated some of its third-generation assets and just this week Orange threatened to pull out of the Swedish third-generation market unless the regulator there relaxed licence conditions.
Last week Vodafone announced it would not be promoting third-generation mobile services outside Japan this year, leading to speculation it may also delay the introduction of services.
It is understood that Vodafone Ireland is concerned about the level of penalties that could be imposed if it failed to meet strict network roll-out requirements.All firms that accept a third-generation mobile licence here must issue irrevocable bonds to ensure they concur with strict roll-out conditions. If they fail to meet these conditions they could lose millions of euros.
But by missing the deadline for payment, Vodafone may now face regulatory and legal hurdles. Under the terms of the tender, a company cannot ask for clarification on licence conditions from the regulator as a reason for an extension, according to industry sources.
There may also be grounds for competitors O2 and Hutchison Whampoa, who have already paid their first instalments, to take legal action against the regulator if an extension benefited Vodafone.
A spokeswoman for the telecoms regulator would not comment on the process last night. She said the regulator's office would make a statement later today.
The Republic was already the last European Union state to award licences following a 12-month delay caused by a dispute over the cost of the licences between the telecoms regulator and the Minister for Finance.
