technology

Italy Risks $2.4 Billion Budget Hole From 5G Auction

  • Telecom Italia, Vodafone, Wind Tre may not bid for frequencies
  • 5G wireless spectrum auction is scheduled for September

Italy’s biggest phone companies are threatening to boycott this year’s auction of mobile spectrum, a move that could blow a 2 billion-euro ($2.4 billion) hole in the country’s already stretched finances.

Telecom Italia SpA, Vodafone Group Plc’s local unit and Wind Tre SpA are leaning against taking part in the September tender because they think the bidding rules set by the regulator are too rigid and the starting price fixed by the government for frequencies in the 700 megahertz band are too high, according to people familiar with the plans.

The carriers are also less inclined to bid because the airwaves won’t be available for faster fifth-generation wireless services until 2022, said the people, who asked not to be identified as the companies’ positions aren’t public. Communications regulator AGCOM has reserved slots in the band for Italy’s fourth carrier, newcomer Iliad SA, which sparked a price war in France when it introduced simple, low-cost mobile packages in 2012.

Italy has budgeted at least 2.5 billion euros from the auction, where the 700 Mhz spectrum accounts for about 80 percent of the price. A botched sale could punch a hole in Italy’s accounts in a year where investor concerns have centered around the country’s future in the euro area after the Five Star Movement and the League -- two Euroskeptic parties -- formed a coalition government. Delays in allotting the frequencies could also jeopardize the roll-out of 5G in a country where internet speeds already lag behind European peers.

A Rome-based spokesman for Telecom Italia declined to comment on the tender and said that speculation about an auction that takes place in September is premature. Representatives for Vodafone, Wind Tre and AGCOM declined to comment.

Italy’s carriers are cold about the 5G auction because it took longer than expected to recoup investments from the 4G tender in 2011, when they spent about 4 billion euros, said Francesco Vatalaro, a telecoms professor at Tor Vergata University in Rome. As a result, the companies are being prudent, especially on the 700 Mhz frequencies. They are also hesitant about spending too much because Iliad has started services with aggressive price offerings.

France had some of the highest broadband and mobile rates in Western Europe before Iliad in 2002 introduced its Freebox broadband-television-phone service, followed by mobile in 2012. Now, French tariffs are among Europe’s lowest.

The starting price for the Italian 700 Mhz spectrum, currently used by TV broadcasters, is about 2 billion euros for six slots in total, where each may bid for a maximum of two. Those frequencies are the most effective in terms of covering large areas with a strong signal.

— With assistance by Dan Liefgreen

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