Future mobiles take flight in Latvia

  • 2001-11-22
  • Leah Bower
RIGA - Ahead of neighboring Estonia and Lithuania, Latvia's tender for next generation mobile phone technology is finally on the horizon.

The government hopes a third player will enter the market alongside Latvia's two existing mobile phone service providers with the sale in 2002 of three third generation mobile phone licenses - also called universal mobile telecommunications systems.

At the beginning of this month the government announced a tender for the task of advising it on how to run the sale of UMTS licenses. Applications are due by Dec. 15.

A key question to be decided is whether the sale should occur by an auction or by some other method.

The winner of the third license will likely compete in an auction alongside LMT and Tele2, the current providers of second generation global system for mobile communications services in Latvia.

While Estonia has already launched a third generation mobile phone testing center where companies and students can test out the newest technology, neither it nor Lithuania have held tenders yet for UMTS licenses.

Unlike current GSM networks, UMTS technology will let consumers use mobile phones for teleconferencing, multimedia applications, Internet surfing and other features that require faster transfer of data.

The Latvian Transport Ministry, which is in charge of finding an adviser, declined to disclose possible candidates, or how many are in the running.

Inara Rudaka, who chairs the commission overseeing the sale also declined to say how much the government expects to raise.

Latvia's media has come up with some wildly different estimates.

Latvian newspaper Diena reported the starting price would range from 1.5 million lats ($2.42 million) to 2 million lats per license while the Baltic News Service said the total take would be between 10 million lats and 15 million lats.

But Bill Butler, managing director of Tele2, hopes these are overestimates.

"We've seen a fair bit of concern over the high prices paid for UMTS licenses elsewhere in Europe," he said.

Auctions for UMTS licenses have brought in less than hoped for across Western and Eastern Europe and mobile companies balked at stiff price tags attached to projects requiring major infrastructure investment.

A Swiss UMTS tender for four licenses was postponed when the number of interested companies plummeted from nine to four, while auctions in Italy, Austria and Holland closed early as bidders backpedaled because of cost concerns.

According to the European research firm IDC, spending on mobile network infrastructure in Western Europe may run into the billions of dollars between now and 2004 as companies upgrade existing equipment and purchase new third generation mobile technology.

Rudaka told BNS that compared to the billions some Western European countries tried to make from selling UMTS licenses, the unspecified sums Latvia is hoping for are small.

While LMT was not immediately available for comment, Tele2, at least, is wary of an auction - currently the government's preferred method of sale, according to Rudaka.

A beauty contest in which sale prices are fixed in advance would suit Tele2 better, said Butler.

"You are better able to control the investment in a beauty contest - auctions are much more prone to speculation," he said.

All bidders for the auction for the advisory position must have international experience in similar projects and knowledge of telecommunications legislation.