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Czech CTU Says Lawsuits Won’t Derail Landmark Mobile Tender

The Czech mobile phone frequency tender aimed at bringing a new competitor to the market and boosting services will continue as planned even as existing operators raise legal challenges, the country’s regulator said.

The three main operators and two newcomers linked to Czech billionaires applied in the tender. Incumbent Telefonica Czech AS filed a lawsuit contesting some conditions as “unauthorized state aid,” while the Czech unit of Vodafone Group Plc (VOD) said it had also taken legal measures. The regulator wants at least 8.72 billion koruna ($460 million) from the sale and doesn’t expect a delay.

“The conditions are rational and evenly balanced so that the sale would fulfill its aim to boost competitiveness and bring new networks,” Czech Telecommunication Office head Jaromir Novak said in an interview in Bloomberg’s office in Prague today. “We don’t expect to change the timeline of the sale and bidding will start around Nov. 11.”

The tender is a repeat of one that failed in May when the regulator, known as CTU, ruled that bids exceeding 20 billion koruna could trigger an unwanted jump in prices for users. Weeks later, the existing operators cut tariffs that, according to Finnish consultancy Rewheel, had been the second highest in the European Union.

The other participants include T-Mobile Czech Republic AS and newcomers Revolution Mobile AS -- a former unit of Czech financial group PPF Group NV owned by billionaire Petr Kellner - - and Tasciane AS, controlled by Czech energy magnate Karel Komarek.

Tender Conditions

PPF Group NV said yesterday it wouldn’t take part because the tender banned any new entrant from merging with another participant for 15 years. Instead, the company sold its unit PPF Mobile Services AS to its chief executive officer, Tomas Budnik. The subsidiary changed its name to Revolution Mobile and applied.

The winners of spectrum will be obliged to hold the frequencies for at least seven years before being able to sell them, according to the conditions. Even after that, no single company can exceed a cap in the 800 MHz bandwidth stated in the auction conditions.

CTU opened the tender envelopes today and has two weeks to asses the applications. It will also check financial links between the companies that want to take part in the sale.

The regulator is also communicating with the European Commission about complaints filed there by T-Mobile Czech (DTE) against the auction rules. CTU received a second set of questions from the officials in August and will answer them according to set deadlines.

“Such procedures are very lengthy and complicated and again, I believe that it won’t have any impact on the sale,” Novak said.

To contact the reporter on this story: Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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