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Of the remaining licences, two have been bid for, and the bids are tied:
These bids might sound like they represent substantial amounts of dosh, but whether they will be close to the final winning bids or merely look like chicken feed at the end of a couple of weeks, remains to be seen. The five licences have reserve prices on them which total in excess of £500 million.
Now, these auctions might not exactly be the entertainment event of the decade, but thanks to the marvel of the Internet, we can actually follow them live, round by round, whooping and hollering as our favourite phone companies vie to outbid each other. OK, it may not be that exciting, but for anyone interested in the process, it looks to be quite educational.
But first, what's it all about? There are five new licences available, each one giving the buyer the rights to use a specific portion of the radio spectrum reserved for 3G phone usage. One block, the largest, is specifically reserved for a new entrant into the UK's mobile phone business. The four existing GSM operators, Vodafone AirTouch (LSE: VOD), Orange (LSE: ORA), BT Cellnet (LSE: BT.A) and One2One are not allowed to bid for this one licence.
In addition to the existing four operators, there are nine newcomers aiming to join the select few, giving the following 13 bidders...
3G (UK) Limited
BT (3G) Limited
Crescent Wireless Limited
Epsilon Tele.Com plc
NTL Mobile Limited
One.Tel Global Wireless Limited
One2One Personal Communications Limited
Orange 3G Limited
SpectrumCo Limited
TIW UMTS (UK) Limited
Telefonica UK Limited
Vodafone Limited
WorldCom Wireless (UK) Limited
Curiously, the Spectrum Auctions website only lists 12 of the entrants, even though it says there are thirteen, and has omitted Crescent Wireless Limited. Maybe they know something we don't. Perhaps someone had better tell Crescent.
The whole auction process, which is apparently based on a formula used by the US Federal Communications Commission, is expected to last for several weeks in total. It is a multi-round process, with round one having taking place today.
What happens is that in each round, each bidder can bid for one licence, and they all make their bids simultaneously. The highest bidder for each of the five licences is labelled the "current" bidder, and if the auction goes no further (that is, no higher bids are made), then the current highest bidders stump up the cash and make off with the spoils. It is probably unlikely that the final winning bids will be made in the early rounds, of course, and it is also possible that some of the licences will not receive any bids at all in early rounds.
The auction then moves on to the next round, with the current highest bidder for each licence being excluded from that next round and not being allowed back into future rounds until their bids have been beaten by others. Doing it this way prevents "current" bidders from continuously topping up their bids and remaining at the head of the queue. Instead, the bids will proceed in a leapfrog fashion.
The auction will finally finish when no more bids are made.
Sound simple? Let's have a look at what's been happening. The bell has sounded for the end of round one today, and the bids currently stand as follows.
There are two licences with clear "current" bids:
LicenceBidder Bid (£m)
A TIW 170.0
B Orange 107.4
LicenceBidder Bid (£m)
D Crescent 89.3
One.Tel 89.3
E Epsilon 89.3
One2One 89.3
The outcome of these auctions will be critical to the future share prices of the companies involved, and the ability for shareholders to see what is happening, as it is happening, is another example of the opening up of information that the Internet is bringing to us. It is interesting to see that neither BT nor Vodafone AirTouch, both constituents of the Motley Fool's Rule Shaker portfolio, have entered the race yet. If either fails to win a 3G licence, we can expect their share prices, and the Rule Shaker's returns, to take a fair old hammering.
Anyway, fascinating though this is to a sad old net-head like myself, I promise I will resist the temptation to bore you all by bringing you up to date auction details on a daily basis. Anyone who is interested, though, can tune in and follow it for themselves. I reckon it beats that WWF wrestling stuff for entertainment hands down.
Tell us about your favourite 3G bidder, or anything else for that matter, on the Fool's Eye View discussion board please.
Related Links
• The Spectrum Auctions web site (external link)
• Fool's Eye View discussion board