Europe rethinks strategy

The outcome of Britain's auction of third generation mobile phone licences has set alarm bells ringing across Europe. A number of countries are already planning how to allocate their own licences as expectations about the amount of money that might be raised soar in the light of the British experience.

One government likely to find itself uncomfortably in the spotlight is France. France has opted for a beauty contest rather than an auction.

Companies wanting a licence will have to submit a bid which will consist of an upfront payment coupled with a strategy designed to show how much money the company plans to invest and the economic benefits that will accrue. There are plans, too, for the government to charge a levy on revenues.

Though that would ensure a steady income stream it will not realise the billions raised in Britain. As one observer said: "The UK government got a lot of money. It may be that the French government is starting to feel a little uncomfortable because people may start asking why France has not raised as much money - which could have been spent on new schools or new hospitals."

Little wonder that Italy, which was going for the beauty contest approach, has rethought. In Germany, the exact number of licences on offer has not yet been decided though it is expected to be between four and six. But Germany is going for a UK-style auction and expectations about the cash to be raised are roaring ahead - with anything from DM50bn (£16bn) to DM100bn being talked about.

Expectations are being influenced by the perception that it is not a question of how much companies can afford, rather that they cannot afford to miss out.