European mobile companies less upbeat on upgrade.

A decade ago, operators of cell phone networks in Europe rushed to spend billions for the chance to provide high-speed wireless connections for their clients.
Ten years later, operators are considerably less excited about investing their money.
In an auction that starts on April 12 in Germany, they are expected to bid about five billion euros, or $6.8 billion, for government licences to upgrade their networks, compared with the E50 billion they spent in 2000.
The restraint reflects the general downturn but also the recognition that quantum leaps in wireless speed alone no longer guarantee success for operators, which are confronting saturated and static markets in Europe.
“The market is in a different phase of development than it was a decade ago,” said Janette Dobson, an analyst at Analysys Mason in Edinburgh, Scotland, who studied the issue for the European Commission. “Back then, the mobile industry was relatively untapped and we were in the midst of the dot-com era.”
Operators paid as much as $5.4 billion for a licence in the German auction a decade ago, then were forced to wait more than five years for equipment-makers to create the services and devices that would work on the networks. The new networks are expected to triple the speed of existing broadband connections and will require similar upgrades in services and devices.
“We are not speculating in advance on what we will end up bidding, but this is a very different environment than 10 years ago,” said Harald Maass, a spokesperson in Munich for O2 Germany, one of four operators participating in the German auctions.
The operators will be bidding on part of the valuable low-frequency bandwidth used by television broadcasters that was freed in the conversion from analog to digital broadcasting. That bandwidth — called the digital dividend — is expected to allow mobile operators to improve coverage in urban areas and help bring mobile broadband to rural areas.
The European Commission wants member countries to set aside the same portion of the spectrum for fourth-generation mobile broadband networks, to standardise the service in Europe in the hopes of creating jobs and services that are tied to the internet. The commission sees the German auction, which will take place in Mainz, as a positive first step.
Britain and France are planning their own auctions, in 2011 at the earliest. Other European countries are not as far along. But Pablo Brito, the vice-director of European wireless marketing at Huawei, a Chinese maker of wireless network equipment, said he expected most countries would eventually follow suit.
“We see EU countries making up at least 80% of the market moving in the same direction,” Brito said. “Harmonized spectrum will make life easier for users, operators and equipment vendors.”
Referring to the prevailing second-generation mobile standard, the Global System for Mobile Communications, which runs 80% of all mobile phones in the world, he added: “That is why GSM was successful. It was a harmonised technology from the beginning.”
Jacques de Greling, an analyst at Natixis in Paris, said this round of spectrum auctions would generate much less revenue for governments because operators felt they overspent the last time, and because most mobile markets are more mature. Industry sales in Germany have declined for the past two years, de Greling said, as competition has driven down prices.
“Back in 2000, operators expected to have a huge increase in their businesses from mobile data with 3G,” de Greling said, referring to the current third generation networks. “With the spectrum being auctioned this year, operators will be looking to maintain their businesses, at best.”