Bidders throw in towel as 3G mobile auction tops £11bn

Two more players have dropped out of the auction for third-generation (3G) UMTS mobile licences in the UK, with total bids now surpassing the £11bn mark.

SpectrumCo, the consortium led by Virgin, and Nomura-backed Epsilon have now dropped out. They join Crescent, backed by Global Crossing, and Eircom's 3GUK who both threw in their hands on Monday.

Eircom chief executive, Alfie Kane, said in a statement: "Our strategy from the outset was to bid aggressively but sensibly for the UMTS licences in the UK, [but] we believe that the business case, especially for a new entrant, is too uncertain beyond IR£2.5bn (UK£1.9bn)."

Andy Peck, marketing strategy director at Smith Group, an advisor to the Radiocommunications Agency (the body resonsible for the auction), said others that drop out might opt to become virtual network operators.

Virgin, which already runs a 2G operation by renting capacity from One2One, could look for such a relationship. Virgin/SpectrumCo was not available for comment.

Of the ten remaining bidders, Canada's TIW has taken over from Telefonica in the race for licence A, which must go to a newcomer. Meanwhile, Vodafone is making a strong case for licence B, the highest capacity licence open to existing operators.

Vodafone has bid almost £2.5bn, the highest for any of the five licences available.

Val Jervis, principal consultant at Netcom Consultants, said: "The licences are likely to go to those with the deepest pockets. But if BT go back to B again, then bidding for that one could yet go a lot higher."

SpectrumCo and Epsilon used bidding waivers before eventually retiring, and Jervis noted One.tel - owned by, among others, Rupert Murdoch - has also used a waiver. However, One.tel is still vying for licence E with Orange.

The other contenders are NTL Mobile and WorldCom.