Telesystem brands UK 3G licences 'too expensive'

The Canadian telco had the right to buy a 6.5 per cent stake in the fifth British UMTS licence for £282m, but rejected the offer claiming it is not value for money.

A Telesystem spokesman said: "We probably can get a cheaper deal and we have the benefit of hindsight. We can see that the dynamics have changed since the beginning of the year and we cannot justify spending money on the most expensive licence in the market."

Instead, the company will invest the money in countries yet to allocate UMTS licences, including France and Switzerland. It has not yet, however, specified exactly where it will concentrate its interest.

"We will invest in a country where auctions have not yet happened so we can play a larger role or make a decision to spend the same amount of money in two different countries, doubling our presence. The going-in cost is too high," Telesystem's spokesman said.

Robin Bothsworth, director at Schema, agreed: "The cost of rolling out UMTS is very high. You need two or three times more base stations than for current networks to provide sufficient coverage with sufficient network bandwidth. You also need a strong nerve and a long-term view, as well as significant capital and cash flow. This is a safe option for Telesystem."

The cost of British 3G licences was recently criticised by MIT guru Nicholas Negroponte. But Hutchison claims it is happy it spent £4.38bn on its licence.

A Hutchison spokesman said: "Hutchison will always look at each market before it bids and, based on that, fix a price it thinks worth paying for any part of the spectrum. The company estimates what it is happy to spend and if the price goes above that amount then we won't go ahead."