Austria to Hold Its Biggest Ever Spectrum Auction This Fall

Austria’s telecommunications regulator will hold the biggest sale of radio frequencies in the nation’s history this year in an auction that mobile operators say is too complex.

The auction of 28 frequency blocks of 800 MHz, 900 MHz and 1,800 MHz spectrum will take place in September, the regulator, TKK, said yesterday. Minimum bids will be 526 million euros ($680 million) in total, it said.

“The maximization of revenue is not a goal of the frequency auction,” Vienna-based TKK said a document posted on its website.

Operators need the spectrum to expand wireless broadband networks to bring faster Internet to devices such as Apple Inc.’s iPhone 5 and Samsung Electronics Co.’s Galaxy S4 in the Alpine nation of 8.2 million. The auction, initially scheduled to take place last year, was delayed due to the takeover of Orange Austria by Hutchison Whampoa Ltd., which was completed early this year.

It will be designed as a “combinatory clock auction,” which has been used in similar sales in the Netherlands, Switzerland, Denmark, Ireland and Great Britain, TKK said. The auction design has drawn criticism from operators, who say it can lead to irrationally high prices. T-Mobile Austria, Deutsche Telekom AG’s Austrian unit, has hired a game theoretician to help with the auction, spokesman Helmut Spudich said in an interview.

Consumer Prices

Auction proceeds that are too high can have negative consequences on consumer prices or the development of infrastructure, Jan Trionow, chief executive officer of Hutchison’s Austrian unit, said in a telephone interview. “Whatever mobile operators spend on the auction, they have to earn back.”

Hutchison plans to spend “three-digit-million” euros on the development of its network, not counting the amount it spends on spectrum, Trionow said.

Telekom Austria AG’s stock fell as much as 5.1 percent in Vienna and was down 4.5 percent at 5.51 euros at 10:46 a.m. after Deutsche Bank cut its recommendation to hold from buy. Investors may focus attention on a potential new entrant with regulators willing to favor it, analysts wrote in a note to clients.

The Austrian regulator said it had reserved two frequency blocks for a new entrant to promote competition. After Hutchison’s takeover of Orange Austria, the number of mobile operators fell to three.

Dutch Proceeds

In December, four carriers paid the Dutch government a total of 3.8 billion euros -- more than expected -- sinking Royal KPN NV and Vodafone Group Plc’s stocks and prompting KPN to cancel its dividend.

The Czech Telecommunications Office canceled an auction of radio frequencies on March 8 after bids from the four operators taking part rose above $1 billion. Such high prices would translate into excessive charges for fast Internet, the agency’s chairman, Pavel Dvorak, said in a statement.

Before it's here, it's on the Bloomberg Terminal.