Germany kicked off a multi-billion euro mobile spectrum auction on Monday, its largest allocation of frequencies ever.
The auction was launched at 14:00 SA time and will be held in former military barracks in a suburb of Mainz, some 40 kilometres south of Frankfurt.
The auction is unlikely to be as lucrative as the one for UMTS licences a decade ago, which led to a bidding frenzy amid the height of the tech bubble and raised 50 billion euros (R492 billion).
Here are questions and answers on who's bidding, how the auction works and what the frequencies are used for:
WHO ARE THE BIDDERS?
The German federal network regulator (Bundesnetzagentur) has admitted four companies to participate in the auction. British mobile phone group Vodafone, German wireless operator T-Mobile, Dutch KPN's German unit E-Plus as well as Telefonica's O2 Germany will bid.
Six parties had sought admission but one interested bidder withdrew and another bidder was not admitted because it did not meet necessary requirements set by the telecoms watchdog.
WHAT DOES THE AUCTION INCLUDE?
The Bundesnetzagentur is auctioning off overall spectrum of 360 megahertz -- three times as much as in 2000 -- in bands of 1.8 GHz, 2 GHz, 2.6 GHz and 800 MHz. The licences will be valid until December 2010.
The spectrum is divided into 41 blocks and also comprises spectrum being released as broadcasters switch from analog to digital TV -- known as the digital dividend.
This 800 MHz part of the auction is especially sought after because it is best suited for fourth-generation mobile broadband technologies.
Vodafone and T-Mobile are allowed to bid for two blocks of 10 Mhz each while O2 and E-Plus may bid for 2 blocks of 15 MHz.
HOW LONG WILL IT TAKE?
The auction is expected to run several days or even weeks. Bidding rounds begin at 0600 GMT each day after the initial kick-off. The last round of bidding must end by 1600 GMT. Each round lasts 90 minutes. Companies have picked six to eight representatives who will bid for them.
The results of each round will be published on the network agency's website (www.bundesnetzagentur.de). The auction is over when no more higher bids are entered for any of the frequencies.
WHY IS ADDITIONAL SPECTRUM NEEDED?
Operators need more spectrum to handle exploding amounts of data traffic crowding the air waves as the usage of mobile phones, laptops and other mobile devices increases.
New services such as mobile health applications or mobile commerce will accelerate demand for bandwidth as well.
The German government is keen to see additional spectrum used to cover rural and remote areas as well as boosting speed, while the European Commission wants to see spectrum harmonized across Europe hoping to create jobs and standardized services.
WHAT'S THE HITCH?
The 800 MHz frequencies coming up for auction are particularly well suited to expand coverage in rural and remote areas because they can carry mobile broadband over long distances.
Therefore, these coveted frequencies come with some conditions attached.
By 2016, 90 percent of the population of cities and areas selected by the states (Bundeslaender) must have either mobile or fixed Internet access before the winners of the spectrum can use it to ease capacity in urban areas.
Villages and districts with a population of less than 5,000 will get precedence over larger towns and cities.
HOW MUCH MONEY WILL BE RAISED?
Analysts expect the auction to generate between 3 billion and 7 billion euros, a far cry from the 50 billion raised in 2000, as operators are reluctant to spend the kind of sums they did a decade ago.
In 2000, the 3G licences where awarded several years before equipment makers had the devices and services ready to use on the UMTS networks and operators never quite recouped their investments.
Of the six operators that bid in 2000, only four ever launched services.
Companies lacked the financial means to quickly develop the network and French-Finish joint venture Quam and Germany's Mobilcom scrapped their 3G rollout plans altogether, subsequently returning their spectrum allocation. - Reuters