UPDATE 1-Austria raises 2.01 bln euros in 4G telecoms auction
* Auction raises 2.01 bln eur, 4 times minimum target
* T. Austria pays 1.03 bln eur, T-Mo 654 mln, H3G 330 mln
* Telekom Austria says looking at options for new debt (Adds confirmation, details from regulator, comments from companies)
VIENNA, Oct 21 (Reuters) - Austria raised 2.01 billion euros ($2.75 billion) in an auction for fourth-generation telecoms frequencies which was among the costliest in Europe to date and totalled almost four times the amount targeted.
The telecoms watchdog said on Monday Telekom Austria paid 1.03 billion euros for 14 frequency blocks, Deutsche Telekom's T-Mobile 654 million for 9 blocks and Hutchison Whampoa's H3G 330 million for five.
The price paid by the operators for 4G spectrum, essential to build new, faster networks and maintain market share, approached prices paid in much larger European countries and equalled the highest per capita so far.
Reuters reported last month that bids had reached around 2 billion euros in the auction, which began on Sept. 9 and had targeted at least 526 million.
Telekom Austria said it would finance the auction through existing cash and new debt, and said it was evaluating several options for raising this. It had been expected to consider a capital increase to protect its credit rating.
All three operators - no new fourth carrier emerged to take advantage of a discounted offer - complained of the high cost, achieved through an auction method designed to maximise uncertainty about rivals' bids and minimise possible collusion.
"These exorbitantly high licence fees are depriving operators of the means they urgently need to build out networks," T-Mobile Austria Chief Executive Andreas Bierwirth said in a statement.
Antonios Drossos, managing partner of Finnish telecoms consultancy Rewheel, said the proceeds were even higher per capita than in the Netherlands, where KPN was forced to scrap its dividend after the frequency auction.
The Dutch auction raised 3.8 billion euros, and similar auctions have netted 4.4 billion euros in Germany, 3.6 billion in France and 2.34 billion pounds ($3.8 billion) in Britain.
Austria, with a population of 8.4 million, is Europe's most competitive mobile market with all-inclusive monthly pay-as-you-go packages available as cheaply as 7.50 euros.
"Austrian operators spent about 60 percent of annual mobile revenues in acquiring broadband spectrum in what appears to be the upper valuation limit," said Drossos, adding that this represented 4 percent over the 15-year lifetime of the licences.
He said the relatively small volume of frequencies acquired by Hutchison's H3G, which aims to increase its market share to 30 percent from 25, put the smallest operator at a disadvantage.
"For 3, this auction result suggests that the addressable mobile market narrows down to urban/suburban areas. 3 as the smallest player was effectively shut out by its large and well funded competitors," he said.
After the auction, Telekom Austria will have 43 percent of available frequencies, slightly less than its 44 percent market share, T-Mobile will have 30 percent compared with 31 percent market share, and H3G will have 28 percent.
Georg Serentschy, head of the telecoms regulator, defended the high proceeds raised.
"In the end, the total market value was priced in here," he said. "Austria is an exemplary country in mobile telecoms."
He added that the regulator would keep a close eye on whether prices for consumers and businesses would rise in the wake of the auction.
The high proceeds will represent a welcome windfall for the new Austrian government, still the subject of coalition negotiations after inconclusive elections in September.
The government had reckoned with 600 million euros, 250 million of which it had earmarked for telecoms infrastructure - but also faces a likely multi-billion-euro bill for the winding down of struggling state-owned bank Hypo Alpe Adria.
Some of the operators demanded that more of the proceeds now be used by the government to fund mobile development. ($1 = 0.7302 euros) ($1 = 0.6178 British pounds) (Editing by David Holmes and David Cowell)