* Cautious optimism prices may have reached turning point
* CEO sees T-Mobile Austria sales rising again in 2014
* Plans legal challenge to expensive frequency auction
(Ads quotes, details on possible cooperation with rivals,
By Georgina Prodhan and Angelika Gruber
VIENNA, Nov 8 A race to the bottom in Austrian
mobile tariffs may be over following consolidation in the market
and a costly spectrum sale, the chief executive of T-Mobile
The lowest tariffs in the market will be removed on Sunday
with the ending of a 7.50 euros ($10.04) per month offer by
rival H3G, while operators will charge more for
premium phones and their contracts this Christmas season.
"I see something happening, and to that extent I am
cautiously optimistic today that we may have passed a low point
in Austria," T-Mobile Austria CEO Andreas Bierwirth told Reuters
in an interview on Friday.
Austria's mobile operators face an imminent bill of 2
billion euros in total for an auction of next-generation (4G)
telecoms frequencies that ended last month and was Europe's most
expensive to date per head of population.
The telecoms regulator will hold a hearing on Monday on the
operators' complaints about the auction process, and Bierwirth
said T-Mobile, which paid 654 million euros for the frequencies
it bought, planned a legal challenge.
"We will start by demanding that the auction be declared
null and void on the grounds of a failure of due process," he
said. "It is already decided internally that we will go through
with legal steps."
The operators say that the auction method chosen, which was
designed to maximise intransparency to prevent collusion, had
the effect of pushing up prices beyond what they could afford.
Bierwirth also said the fact that each operator could bid
for up to 50 percent of the spectrum had made it possible for
one to emerge empty-handed, pushing them to bid more for fear of
being left out in the cold.
"We were forced to bid not for the value of the spectrum but
up to the whole value of the company," he said, as no operator
without 4G spectrum and the other, current-generation
frequencies whose leases are expiring could offer a service.
Market leader Telekom Austria emerged from the
auction with 50 percent of the frequencies on offer - also a
point of contention with rivals who say the process failed to
H3G, still the smallest player in the market after its 1.3
billion-euro acquisition of bigger Orange Austria at the
beginning of the year, won just 18 percent and none of the most
valuable 800 megahertz spectrum, weakening its position.
Bierwirth said T-Mobile would in any case go ahead with
building out its 4G services - which will cost it in total more
than 100 million euros on top of the roughly 100 million it
spends each year on modernising its network.
He said T-Mobile aimed to reach about 25 percent of the
Austrian population with 4G by the end of the year, mostly in
inner cities, rising to 90 percent by the end of 2015.
CUT TO THE LIMIT
Austria, where three operators fight over a population of
8.4 million, has long had Europe's cheapest mobile tariffs, and
telecoms investors had been hoping for change since the merger.
With the ending of the H3G offer, the lowest all-inclusive
tariff in the market will be 10 euros per month.
T-Mobile Austria will likely still suffer a further revenue
decline this year but a turnaround may come next year as
customers with cheaper contracts drop out of the mix after a
focus this year on high-value customers, Bierwirth said.
Partly as a result of the high auction cost, T-Mobile
Austria will cut costs "to the limits of what our business model
can sustainably and sensibly bear", he said.
The company saved around 40 million euros last year, and now
plans to move out of half its Vienna headquarters and is talking
to staff representatives about a possible restructuring of its
call centre and working hours, Bierwirth said.
T-Mobile Austria also plans to parcel out some of its
technical operations into a subsidiary that will be founded in
March in preparation for the possible sharing of network
elements with competitors to save more costs, he said.
These will include masts, batteries and connection lines
that would enable so-called passive network-sharing - which
already takes place in some other countries - but not the more
intelligent components that give operators a competitive edge.
"We will explore synergies with competitors as far as is
allowed by the regulator," he said. "There should be relative
openness to this from competitors after the expensive auction."
($1 = 0.7472 euros)
(Editing by Michael Shields)