Auction of Third Generation Mobile Radio Spectrum

DTI Press release - 29 January 1999

Conditions for BT to take part and conditions for removing a shareholding restriction in Cellnet announced

In order to help clarify matters which have been the subject of recent speculation, the Department of Trade and Industry made the following announcement to the Stock Exchange this morning:

"In the July 1997 consultation document on third generation mobile telecommunications systems ("Multimedia Communications on the Move"), the Government indicated, subject to the views of respondents, that BT should be permitted to bid for and, if successful, be awarded radio spectrum for the provision of third generation mobile services
provided that suitable competition safeguards could be put in place.

"BT is already subject to a range of regulatory measures including the Competition Act, measures to prevent undue discrimination in the provision of services, and regulatory oversight by the Director General of Telecommunications. The Department of Trade and Industry has also taken account of the EC Licensing Directive which requires
that the licensing process and licence conditions are objectively justified, proportionate, transparent and non-discriminatory.

"It is the DTI's view that BT should be allowed to participate in the auction of third generation mobile spectrum on condition that it agrees to place any third generation activities into a separately accounted business, the purpose of which will be to ensure that BT does not unfairly subsidise or cross-subsidise or show undue preference or exercise undue discrimination in favour of its third-generation mobile business, should BT be successful in the auction.

"If BT are to be able to hold wholly in its own name a third generation mobile licence, subject to competition safeguards, then it is reasonable that the company should be able to hold similarly a second generation mobile licence, subject to similar safeguards. This is the case because third generation mobile services will include comparable services to those already provided by second generation mobile telecommunications.

"The Secretary of State for Trade and Industry would be minded, therefore, to remove the shareholding restriction in Cellnet's Telecommunications Act licence, which effectively precludes BT from raising its stake in the company above a 60 % ceiling, if BT placed its Cellnet shareholding into a separately accounted business, the
purpose of which will be to ensure that BT does not unfairly subsidise or cross-subsidise or show undue preference to or exercise undue discrimination in favour of Cellnet."

Notes for Editors

1. The first generation of analogue mobile telephones provided simple voice telephony. The current Second Generation networks added some data services like fax and e-mail to the basic voice service, and are expected to add higher data rate capabilities over the next few years. The Third Generation will be capable of delivering high-resolution video and multimedia services on the move, including mobile office services, virtual banking and on- line billing, home shopping, video conferencing, on-line entertainment and fast Internet access.

2. The announcement today makes clear the condition under which BT would be permitted to participate in the auction of Third Generation mobile radio spectrum. A further announcement about other arrangements for the auction will be made in due course.

3. Under Cellnet's Telecommunications Act Licence, which allows the company to run a public mobile telecommunications network, the Secretary of State for Trade and Industry may revoke the licence should any party increase their shareholding in the company above a 60% ceiling.

4. The shareholding restriction was introduced in 1983 as a competition safeguard given BT's dominance in fixed line telecommunications. Over time accounting separation has become a more appropriate means of meeting competition safeguard objectives and the announcement clarifies that, should BT agree to account separately for its Cellnet
shareholding, the restriction may be removed from Cellnet's licence.

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