Bloomberg News

Spain Starts Wireless-Spectrum Sale in Plan to Trim Deficit

June 29, 2011

(Adds other auction participants in fifth paragraph.)

June 29 (Bloomberg) -- Spain kicks off its first wireless- spectrum auction today, a sale aimed at raising 2 billion euros ($2.9 billion) as the government races to rein in the euro area’s third-largest budget deficit.

Telefonica SA, Vodafone Group Plc and France Telecom SA are among 11 phone companies that participated in the auction of 270 megahertz for mobile services that started today. Operators will bid for 58 blocks in the 800-MHz, 900-MHz and 2.6-gigahertz frequency bands.

“This will be very significant for Spain’s aim to meet its deficit target at the end of the year,” Jose Carlos Diez, chief economist at Intermoney Valores in Madrid, said by phone today. “It will also be a good booster for country’s competitiveness so that it’s not left behind compared with other European counterparts.”

Final results of the auction will be known in 10 to 15 days, said a spokeswoman for the Industry Ministry, who declined to be named citing government policy. The Madrid-based ministry will post daily results on its website, indicating the price and the blocks auctioned, without providing the name of the operators, she said.

The auction is aimed at boosting competition, including helping reduce prices and increasing quality, by giving smaller operators more access to mobile-phone frequencies. Phone company Jazztel Plc, Spanish broadband provider Grupo Corporativo Ono SA and Basque-region cable company Euskaltel SA also participated in the auction.

Spanish Deficit Targets

Prime Minister Jose Luis Rodriguez Zapatero is facing growing political and popular opposition to his efforts to scale back the budget deficit this year to 6 percent of gross domestic product from 9.2 percent in 2010. The government plans to cut spending by an additional 3.8 percent next year to reduce the deficit by 2013 to within the European Union’s target of 3 percent of GDP.

The Spanish auction will take place ahead of mobile-phone frequency sales this year in France, Italy and Switzerland. U.K. Communications Minister Ed Vaizey said in Paris today that his government is “absolutely” committed to holding a frequency auction early next year following delays.

The U.K., which has already seen the number of operators fall from five to four, is one of the most competitive markets in Europe, according to Matthew Howett, an analyst at telecommunications consultant Ovum in London.

France Telecom, TeliaSonera

While Spain is among countries that have sought to rebalance spectrum holdings amongst the operators, the U.K. is seeking to impose rules through the auction to maintain at least four operators.

In Spain, France Telecom won a license earlier this month for a 900-MHz spectrum block and TeliaSonera AB’s Spanish mobile-phone unit won three 1,800-MHz licenses in uncontested sales. The French company pledged to invest 433 million euros in mobile infrastructure, the ministry said June 10. France Telecom also paid 126 million euros to the Spanish treasury.

Xfera Moviles SA, which operates under the Yoigo brand and is owned by Stockholm-based TeliaSonera, paid 42 million euros for its licenses and promised to invest 300 million euros. All the licenses run through 2030.

--With assistance from Matthew Campbell in Paris and Jonathan Browning in London. Editors: Tom Lavell, Kenneth Wong

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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