3rd generation (3G) mobile telecommunication services :Examining the effect of spectrum licence administration procedures on investment, pricing, and the regulatory environment from a national and pan-European perspectiv

The European 3G mobile phone spectrum administrations, which took place between 1999 and 2002, used a variety of different methods for allocating licences. The total value of licence fees raised by auctions tended to be significantly higher than those achieved in countries which adopted a 'beauty contest' approach for assessing bidders. Post-administration, many of the licence-winning firms experienced financial distress. There were suggestions at the time that the firms that won licences through auction procedures had suffered a 'winner's curse'. There was a certain amount of support for this proposition; licence winners across Europe delayed the roll-out of 3G network infrastructure and, in a number of cases, handed back their licences or had them revoked. By pooling data across European spectrum administrations, this thesis presents an empirical analysis of how much was paid for licences and who won them. The analysis provides evidence for the proposition that administrators raised considerably higher revenues with auctions than was the case with beauty contests. In addition to this, the analysis also finds that a number of key revenue-raising factors were out of the control of the administering authorities. The second part of this thesis seeks to identify a winner's curse through a comparative event study of the German auction and the Swedish beauty contest. This analysis provides clear support to the proposition that some firms that won licences through auction procedures suffered a winner's curse. The final part of the thesis examines the role of regulation and regulatory bargaining in the mobile telecommunications industry. Through the application of real option theory, it can be shown that a high licence fee can cause delay in network infrastructure investment. A simple two stage Nash bargaining model can then be used to show how this may affect regulatory behaviour.