TELECOMMUNICATIONS: GERMANY OKAYS CO-OPERATION TO HELP FUTURE UMTS OPERATORS.

• Position: Universal Mobile Telecommunications System - Government Activity

The move by the Regulator removes a thorn from the side of operators forced to dig deep less than a year ago to acquire one of the six licences auctioned off in Germany, Europe's largest telecoms market. The six winning bidders paid a total of Euro 50.519 billion, more than 8 billion per licence, with network construction costs to be added to this figure. The overall bill to each operator is estimated by sector experts at some Euro 14 billion.Investors, who a year ago still regarded 3rd generation mobile telephony as a "sure thing" have been assailed by serious doubts over recent months regarding the profitability of new services, and have clearly signalled this on the financial markets, where operators' share values have plummeted. According to the 3G consortium (comprising the Finnish Sonera group and Spain's Telefonica) which secured a German licence, co-operation on network construction should yield cost savings of 30 to 40%. MobilCom, in which France Telecom holds a 28.5% stake, is meanwhile anticipating savings of more than Euro 2 billion per operator.Given these conditions, telecoms groups have not surprisingly welcomed the Regulator's announcement. Only the British giant Vodafone, which holds a licence through its Mannesmann Mobilfunk subsidiary, the leading operator on the German mobile telephony market, appears unconvinced. Initially highly sceptical, Deutsche Telekom may also be won over by co-operation, since with massive debts amounting to Euro 57.1 billion, according to the latest figures, the Bonn-based group cannot afford to forego even the most modest savings.It remains to be seen how the German gesture will be received by its European partners and the European Commission, certain fears having already been expressed that co-operation between operators might lead to a restriction of competition. Whilst European countries appear to agree on the need to offer some help to prospective UMTS operators, staggering under the burden of massive debts, the solutions proposed differ widely. France, where the allocation of licences turned into a fiasco, proposes to modify the timetable and procedures for the allocation of its two remaining licences. Certain analysts suggest these changes are likely to result in a 20% reduction in the cost of the licences. In the United Kingdom, where the auction last spring earned the Treasury a massive Euro 38.5 billion, site sharing may also be authorised, not least on...