* Bidding process ongoing, total close to 2 bln euros
* Final price will come down from last highest bids
* Government has budgeted 600 mln eur from auction
By Georgina Prodhan and Angelika Gruber
VIENNA, Oct 1 (Reuters) - Austria’s auction for fourth-generation telecoms frequencies is into its fourth week with bids already about four times the minimum price set by the regulator, according to Reuters calculations.
Based on confidential information about the auction from a source close to the process, conservative calculations show the total bid volume close to 2 billion euros ($2.7 billion).
“It’s going in that direction,” said the source when presented with the calculations.
The regulator had said the price would rise by “a few percent” in each bidding round.
Three sources with knowledge of the matter said the process was still going on, and two of them said no fourth player had emerged to take advantage of cut-rate offers designed to encourage a new market participant.
When the initial bidding rounds are over, the total will come down after participants submit sealed bids for combinations of frequency blocks.
The actual price paid by the winner will approximate to the second-best offer received, to ensure that the successful bidder is paying no more than would have been necessary to win, the regulator said.
“We do not give any estimates. We provide no further information,” a spokeswoman for the regulator said on Tuesday.
The sale will provide a windfall for the new government, to be formed in coalition talks that are about to start after weekend elections and which will have to contend with a possible 5.4 billion euro bill for the break-up of troubled state bank Hypo Alpe Adria.
A high price could also trigger a capital hike at Telekom Austria - which had been expected to spend 300-400 million euros on the auction - and slow down investments in building the networks that the new frequencies will enable.
The regulator in the Czech Republic - a country with a population of 10.2 million compared with Austria’s 8.4 million, aborted its fourth-generation spectrum auction in March after bids rose above 20 billion crowns ($1.05 billion), on concerns the operators would have no cash to invest in building networks.
Based on the starting price in the Austrian auction of 526 million euros and bids rising in increments of 2 to 5 percent in three to four rounds per day since Sept. 9, the bids should already have reached 2 billion euros.
Former state monopoly Telekom Austria, Deutsche Telekom’s T-Mobile and Hutchison Whampoa’s H3G have been invited to compete for spectrum they need to build LTE networks, capable of 10 times currently available speeds.
The operators, under threat of being expelled from the auction if there is any hint of collusion, have been forbidden even to confirm that they are taking part.
Austria’s small and highly competitive market shrunk to three operators at the start of this year when H3G bought Orange Austria. Operators have been experimenting in the wake of the consolidation wtih new tariffs aimed at encouraging customers to pay more, especially for heavy data usage, but it is not yet clear whether this is translating into higher revenues.
Telekom Austria made core domestic profit of 903 million euros last year, T-Mobile Austria made 234 million and H3G 50 million.
Many European operators are still burdened with mountains of debt following auctions for third-generation (3G) frequencies at the turn of the century, after take-up of 3G services took far longer than foreseen to materialise.
Fourth-generation spectrum auctions elsewhere in Europe have raised 4.5 billion euros in Germany, 3.8 billion euros in the Netherlands - forcing Dutch operator KPN to cut its dividend - and 2.3 billion pounds ($3.7 billion) in Britain.
The European Commission has proposed new rules allowing it to block overly costly mobile spectrum auctions, in a plan that will discussed by EU leaders on Oct. 24.