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New participant makes early running in the German 5G auction

MAINZ/FRANKFURT (Reuters) – Germany’s auction of spectrum for 5G mobile networks attracted strong initial bids on Tuesday, with potential new participant 1&1 Drillisch to submit bold offers for the frequencies it desires.

Jochen Homann, President of the German Federal Network Agency (Bnetza) is behind a stopwatch for the symbolic start prior to the auction of spectrum for 5G services, the federal network agency headquarters in Mainz, Germany, March 19, 2019. REUTERS/Kai Pfaffenbach

Drillisch, carried out by maverick tycoon Ralph Dommermuth, is vying for a fourth operator in Europe’s biggest economy – a move that could benefit the consumer, but the pressure on the margins of the existing three players.

It made the early running in the auction is being held in a former barracks in the south-west of the city of Mainz, which, according to the results posted online, had raised a total of 314 million euros ($357 million) by lunch.

Drillisch majority owned by United Internet , put a marker in the first round by a strike of more than 20 million euros per piece for 10 of the 41 blocks of spectrum to offer.

By contrast, the existing three operators – Deutsche Telekom, Vodafone and Telefonica Deutschland – submitted only minimal opening of the bids for the blocks in which they are interested.

The auction only started after a court last week threw out lawsuits from the operators, who had complained that a requirement to provide high-speed coverage to 98 percent of the households by 2022 was too heavy.

FOUR IS A CROWD

The four companies vying for spectrum in the 2 GHz, 3.6 GHz band, – the latter particularly suitable for running ‘connected’ factories, is a priority if German exporters seek to remain competitive in the digital age.

Dommermuth, a self-made millionaire, has conducted to 2.8 billion euros in the financing of its 5G ambitions, which suggests that there could be fireworks in the auction, after Germany, the latter, in 2015, increased to 5.1 billion euros.

But despite his eye-catching entrance, analysts don’t expect offer to get out of hand, such as in a lapse of the 3G auction in 2000 shows that 50 billion euros, so that some players to exit the German market and others merge.

“The only reason for the high auction prices … it will be a pointless strategy block 1&1 and Drillisch,” said Berenberg analyst Usman Ghazi.

He said that would be pointless, because Drillisch, who now runs a ‘virtual’ mobile network, already has guaranteed access to Telefonica’s network under terms and conditions associated with the merger with E-Plus five years ago.

Most of the national 5G auctions held in Europe until now, his low-key, low-cost business. The exception was Italy, where fierce bidding last year generated revenue of eur 6.5 billion and left operators financially stretched.

AUCTION ACTION

In Mainz, the further auction rounds saw intriguing duels to develop, such as Vodafone outbid Drillisch on two blocks and Deutsche Telekom, one-on-one.

Most of the other blocks languished in the near of reserve prices ranging from 1.7 million to 5 million euro, as the teams hunkered down for a campaign that may last several weeks.

The participants had to surrender their smartphones at the entry of the federal network agency branch. Isolated in separate rooms to prevent collusion, offer them on a secure network and can only at the request of the leadership of the head office through fax.

“We are pleased that it is still underway – it’s a bumpy start, and could have happened earlier,” said Deutsche Telekom spokesman Philipp Schindera.

Slideshow (5 Images)

Supervisors also clarifies ground-rules applicable to network equipment vendors following US pressure on the allies in the ban China’s Huawei Technologies on the national security garden.

Germany chose instead to impose stricter compliance requirements on all suppliers, creating a level playing field and allaying the concerns of the operators that use Huawei equipment – that they would have to replace parts of their networks at high cost.

“Our approach is not only to exclude from one company or one actor, but we have the requirements of the competitors for this 5G technology,” Chancellor Angela Merkel said Tuesday in Berlin, explaining her government.

Additional reporting by Paul Carrel; Writing by Douglas Busvine; Editing by Kirsten Donovan and Emelia Sithole-Matarise

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