3G mobile bidding tops £20bn

Bidding in the auction for third-generation (3G) mobile phone licences in the UK topped £20bn on Friday, four times that of the expected figure.

Bidding for all five licences, which will let operators build and run high-speed wireless networks, broke through the £20bn barrier at the end of round 128. With just seven of the original 13 bidders remaining, only two more have to drop out for the auction to end.

US telecoms group Worldcom withdrew yesterday after it had offered more than £3bn for licence D. Other companies which have pulled out of the race include those backed by Sonera, Virgin, Eircom, One.tel and Global Crossing.

Vodafone continues to outbid BT in the race for licence B, potentially the most lucrative because it offers the most bandwidth. BT became the first bidder to offer more than £5bn for a licence yesterday, but at the end of round 128 Vodafone leads the race with £5.125bn.

According to reports, there are also signs that the high bids are beginning to take their toll on the remaining companies. UK mobile group Orange has increased a loan to fund its bid from £3.5bn to £5bn. The four UK mobile operators, along with cable giant NTL, Canadian group TIW and Spain's Telefonica, remained in the race at the end of round 128.

Next generation technologies will enable high-bandwidth wireless transmissions. Services which are likely to emerge include video, audio and streaming data on the move.

However, with the first consumer products not expected to be available until 2002, companies targeting consumers with products using second generation technologies such as GPRS may build up a strong customer base.

Iain Stevenson, an analyst at Ovum, said: "3G technologies aren't going to arrive for three to four years in Europe. There is a window of time where the capability will be with GPRS. Mobile operators will need to adopt GPRS."

Cambridge Consultants Ltd (CCL) is working with Orange to develop a mobile videophone to launch this year. The company said the videophone, which will use second generation packet-based transmission technology, will provide an opportunity for service providers to gather an idea of what consumers actually want.

Jim Schoenenberger, business development manager at CCL, said: "There is the opportunity while others sort out their 3G networks for companies to gauge what products the market wants and retain customers."