Czech regulator suspends mobile frequencies auction

The Czech Telecommunications Office (CTU) has suspended an auction of mobile frequencies that could have brought a fourth entrant into the Czech market. The regulator said bids for the aggregated auctioned frequencies had risen above 20 bln. CZK which was too much to make economic sense and would lead to high prices of 4G mobile services. The regulator said it was revising the tender conditions and would inform of future steps in due course.

Our view: We originally expected the final price for frequencies could reach 1,5 times the initial price, or roughly 10 bln. CZK. We think that the aggregated sum of all bids have risen so high due to inappropriate action rules set by the regulator. Action rules allowed the participants to withdraw their highest bids 5 times without any penalty (!), which probably made the whole process endless and caused such high price. We think the regulator will likely drop this rule and launch a new auction. The news could be slightly positive for TEFO2 as the new auction under revised rules could mean lower price for LTE licence.