Belgian Spectrum Auction for

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Belgian Spectrum Auction for Third Generation
Mobile Communications
ABN Amro
N M ROTHSCHILD SONS
September 2000
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IMPORTANT NOTICE This presentation has been
prepared on behalf of the Minister for
Telecommunications and the Belgian Institute of
Post and Telecommunications (BIPT), together
the Government, by NM Rothschild Sons Limited
(Rothschilds) and ABN Amro, and their
subcontractors as financial advisors, together
the Advisors, in connection with the possible
allocation of spectrum for third generation
(3G) mobile telecommunication service by
auction (the Auction). The information
presented in this document concerning the Auction
reflects the current working plan and will be
presented to the Council of Ministers. The
presentation (which is for information purposes
only) is made available on the express
understanding that it will only be used by the
recipient for the sole purpose of assisting the
recipient in deciding whether it wishes to
proceed with a further investigation of possible
participation in the Auction. The presentation
is not intended to form the basis of any
investment decision or other evaluation or any
decision to participate in the Auction and should
not be considered as a recommendation by the
Government or the Advisors to any recipient of
the presentation to participate in the Auction.
Each person to whom this presentation is made
available must make its own independent
assessment of the potential value of an
allocation of 3G Spectrum after making such
investigation as he may deem necessary in order
to determine whether to participate in the
Auction. All information contained in this
presentation is subject to updating, modification
and amendments. While the information contained
in the presentation is believed to be accurate,
it has not been independently verified by the
Government or the Advisors and none of them or
any of their respective directors, partners,
officers or employees make any representation or
warranty (express or implied) nor accept any
responsibility as to, or in relation to, the
accuracy or completeness of the information
contained in the presentation or any other
written or oral information made available to any
interested party or its advisors (and no one is
authorised to do so on behalf of any of them) and
any liability in respect of any such information
or any inaccuracy therein, or omission therefrom,
is hereby expressly disclaimed. In particular,
but without prejudice to the generality of the
foregoing, no representation or warranty is given
as to the achievement or reasonableness of any
future projections, estimates, prospects or
returns contained in this presentation. The
presentation does not constitute an offer or
invitation to participate in any Auction, nor
does it constitute the basis of any contract
which may be concluded in respect of any
allocation of 3G Spectrum. Recipients are not to
construe the content of this presentation, or any
other communication by or on behalf of the
Government or the Advisers, as legal, tax or
other advice. Accordingly, each recipient should
consult its own professional advisors as to
legal, tax and other matters concerning any
potential participation in the Auction or any
allocation of 3G Spectrum. Covering page From
left to right, 3G device graphics have been
provided courtesy of Nortel Networks and Siemens.
Inclusion of these images does not imply
agreement by Nortel Networks or Siemens to any of
the content of this presentation.
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Contents

• Section Page
• 1. The Belgian opportunity 2
• 2. What is third generation mobile? 3-4
• 3. Key policy issues 5
• 4. The licences 6
• 5. The allocation process 7
• 6. The expected timetable 8
• 7. Other questions 9
• 8. Next steps 10
• Annex
• 1. Key economic indicators 11
• 2. The mobile market in Belgium 12-13

Page 1
4
Current Penetration Levels
80
70
Finland
Norway
Sweden
Austria
Italy
Denmark
60
Netherlands
Portugal
UK
Switzerland
50
Spain
Ireland
Greece
Germany
Mobile Penetration (1st July 2000)
40
France
Belgium
Belgium Penetration levels are low compared with
other countries of similar GDP per capita.
30
Cyprus
20
10
0
30,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
28,000
GDP (PPP)/capita (US)
Source Rothschilds, Mobile Communication,
Economist Intelligence Unit
Facing Page 2
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1. The Belgian Opportunity

• By the end of 2000, the Belgian Government
  intends to auction four licences for the
  development of third generation mobile services
• A unique opportunity to roll out a new mobile
  data network in the heart of the EU in one of its
  most prosperous countries
• Belgium has one of the lowest mobile penetration
  rates in Europe, offering potential for growth,
  and has only three incumbent operators
• High population density (330 persons/km2) and
  large number of international roaming customers
  also make the market an attractive opportunity
• New entrants are actively encouraged and the
  number of licences should ensure at least one new
  mobile operator
• Access to mobile services and spectrum is
  becoming essential for software, IT and even
  broadcasting
• An opportunity for telecoms and non-telecoms
  businesses alike
• Measured by GDP per head. Source Economist
  Intelligence Unit

Page 2
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Capacity Requirements
Internet Growth
Consumer "Info-tainment"
Spectrum Availability
IT
Media
Mobile Computing
Technological Change
Telecoms
Data Overtaking Voice
Market Demand
Fixed/Mobile Convergence
Facing Page 3
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2. What Is Third Generation Mobile (3G)?
Overview

• 3G is a revolutionary digital technology with
  significantly enhanced capabilities over second
  generation GSM
• Higher transmission speeds will enable a host of
  mobile data and multi-media applications
• 3G in Belgium will form part of the IMT-2000
  family of third generation mobile systems
  operating in spectrum reserved on a global basis
  by the ITU

New technology
High speed
Universal
Page 3
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2. Third Generation Mobile
2.3 Data rates
Time to transfer this presentation (5.8MB)
Source 3G Forum Rothschild analysis
Facing Page 4
9

• Potential 3G services
• 3G will support high speed, interactive services
  for mobile phones, mobile terminals and laptops
• fast internet and corporate intranet access
• enhanced quality voice, fax and email
• broadcasting and audio on demand
• on-line banking and shopping
• real time high quality video conferencing
• a virtual office on one line - with simultaneous
  voice and data services allowing customers to
  makecalls, receive faxes and remain on an office
  network simultaneously
• 3G is also likely to be an enabling technology
  with many embedded applications
• portable entertainment facilities - on-line CD
  players and TV monitors
• in-car real time navigational systems
• telemetry functions
• machine to machine communications
• Working prototypes have already been developed by
  manufacturers and field trials are underway

Page 4
10

• The Governments objective is
• The implementation of a transparent and
  objective licensing process to the benefit of
  Belgian consumers and the Belgian economy, which
  is intended to
• introduce, in a timely manner, innovative 3G
  services
• create further competition in the Belgian mobile
  market
• efficiently use the available spectrum and
• subject to the above, achieve a fair
  market-based price for the licences.
• The regulatory framework for this process is
  currently under development, with all options
  under review.
• Source Rik Daems, Ministre des
  Télécommunications et des Entreprises et
  Participations Publiques

Facing Page 5
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3. Key policy issues
The Belgian Government wants to attract new
operators through a transparent and objective
process

• 4 licences, thus facilitating at least one new
  entrant to the mobile market
• Limited admissibility assessment given the range
  of applications for 3G technology alongside
  warranties
• Roaming from 3G to 2G being envisioned for new
  entrants
• Backstop framework for roaming being envisioned
  if no agreement can be reached between operators
  by negotiation
• Site sharing is contemplated (based on the
  Interconnection Directive), with transparency of
  site locations and rapid decisions taken in the
  event of disagreement

Number of licences
Qualification
Roaming
Site sharing
The Council of Ministers will decide in September
2000
Page 5
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Up link
Down link
Paired
MSS Mobile Satellite Service T-3G Terrestrial
3G FS Fixed Service SSS Space Science Service
Facing Page 6
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4. The licences

• Spectrum Allocation
• 155 MHz made available cleared by the end of
  2001
• 2x60 MHz paired, 35 MHz unpaired, both in 2GHz
  bands (in accordance with International
  Telecommunications Union)
• The Belgian Licences
• Four licences in equal packages of 2x15MHz paired
  plus 5MHz unpaired
• For 20 years
• Minimum roll out conditions are being worked out

Page 6
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5. The Allocation Process
The working hypothesis is that allocation process
will be an auction

• A multiple round ascending auction of specified
  national licences
• This will start at a pre-set reserve price, and
  continue until all licences are allocated or no
  more bids are received
• Strict rules will be put in place to avoid
  duplication of ownership interests and collusion
• Upfront deposits will be requested from Candidates

Form of auction
Auction rules
Deposit
Page 7
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6. The Expected Timetable
Sept
Oct
Nov
Dec
Legislation passed
IM in issue
Qualification
Auction starts
Quick responses will be required from bidders to
meet the timetable
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7. Other Questions

• Will incumbents receive special treatment?
• Entry to the Auction is expected to be simple and
  inclusive, allowing a wide range of companies to
  participate (both traditional telecommunication
  companies and new entrants to sector). The
  underlying principle is non-discrimination.
• What will happen to remaining 2G spectrum?
• Decisions have not yet been taken. But these
  will clearly need to proceed in accordance with
  the Licensing Directive and take account of the
  demand for spectrum.
• Will refarming (spectrum re-use) be permitted?
• There is no current intention to refarm existing
  cellular spectrum unless this is in line with
  international agreements. 3G technology will
  only be licensed for use in spectrum designated
  in Europe for 3G, which does not at present
  include spectrum held by the existing cellular
  operators.
• What about number portability?
• Number portability has the potential to increase
  competition and improve the services available to
  consumers. The Government is currently examining
  a draft European Directive on the issue which it
  would expect to implement as a Member State if
  and when it is ratified.

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8. Next Steps

• Further information on the opportunity can be
  found through
• Rothschilds / ABN AMRO - James Vaux or Richard
  Forgan 44 171 280 5000
• (james.vaux_at_rothschild.co.uk /
  richard.forgan_at_rothschild.co.uk)
• BIPT (the Belgian postal services and
  telecommunications regulator) has a dedicated
  website for this 3G auction www.bipt.be

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Annex 1. Key Economic Indicators
1999
2000 (F)
Population Density (pop/km2)
330
333
Source Economist Intelligence Unit
Page 11
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Historic Subscriber Growth
Scandinavia High substitution of mobile for fixed
Belgium Penetration levels lower and
substitution less advanced
Source Mobile Communications
Facing Page 12
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Annex 2. The Mobile Market in Belgium
The Belgian mobile market offers potential
opportunity for growth

• Penetration rates in Belgium (38) are below the
  EU average (50)
• The number of mobile subscribers are also low
  compared with other EU countries with similar GDP
  per head
• High population density (330 people / km2)
  reduces per capita network roll out costs

Mobile Subscribers
Capital requirements
Teligen Ltd, OECD
Page 12
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Belgian Market Split
5
Proximus
31
Mobistar
KPN Orange
64
Market Share by number of subscribers (July 2000)
Source Mobile Communications
Facing Page 13
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Annex 2. The Mobile Market in Belgium (2)
There are currently three operators in the
Belgian mobile market
Subscribers
Subscribers
System
Ownership
Launched
(July 2000)
(July 1999)
75 Belgacom
Proximus
GSM
Jan-94
2,500,000
1,550,000
25 Vodafone
51 FT
Mobistar
682,000
1,235,000
Aug-96
GSM
20 Public
50 KPN
KPN Orange
DCS-1800
Mar-99
191,000
4,500
50 Orange
Source Mobile Communications
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