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Orange and T-Mobile get the bill for licence extensions

REPORTS in early August about the possible arrival of a fourth operator in the Slovak mobile phone market came just as Slovakia's Telecommunications Office (TÚ) was deciding to extend the frequency licences of the country two largest existing operators, Orange Slovensko and Slovak Telekom (which markets mobile services under the T-Mobile brand). The companies’ original licences were valid until the end of August, but it was not until August 10 that the TÚ announced that it would extend them for another 10 years. The cost of the extensions was released the following day: almost €41 million for Orange Slovensko and almost €48 million for Slovak Telekom.

What effect will higher-than-expected licence extension fees for Slovakia’s two biggest mobile operators have on customers?(Source: SME)

REPORTS in early August about the possible arrival of a fourth operator in the Slovak mobile phone market came just as Slovakia's Telecommunications Office (TÚ) was deciding to extend the frequency licences of the country two largest existing operators, Orange Slovensko and Slovak Telekom (which markets mobile services under the T-Mobile brand). The companies’ original licences were valid until the end of August, but it was not until August 10 that the TÚ announced that it would extend them for another 10 years. The cost of the extensions was released the following day: almost €41 million for Orange Slovensko and almost €48 million for Slovak Telekom.

The TÚ used ARPU (average revenue per user) indicators to calculate the licence extension fees and the frequency bandwidth, according to TÚ spokesperson Roman Vavro.

Branislav Máčaj, a former head of the TÚ, commented that calculating the licence fees by using average revenues per user effectively penalised the more successful operator.

“At question are identical licences and the operator who is able to earn more per user will now pay more,” Máčaj said, as cited by the Sme daily.

Lat year Orange generated revenues of €774 million from around 2.8 million clients, while Slovak Telekom generated only €499 million from its 2.2 million clients.

The decision is still not valid and operators can challenge it. Orange Slovensko indicated before the TÚ announced the licence extension fees that if its one-off charge were higher than €5 million, it would consider arbitration against Slovakia, Sme wrote. In 2006 Telefónica Slovakia, the third mobile operator, paid €5 million for its 20-year GSM and 3G licences.

Slovak Telekom may be able to sue Slovakia for a change in the law since the Slovak Parliament changed the relevant law after the company had originally filed an application to extend its licence. Slovak Telekom applied for extension of its licence on January 28, when the law did not allow for collection of fees for an extension. Parliament on April 5 adopted a revision stipulating collection of a fee for extension of the licence as of May 1. The revision also halted existing licence extension procedures. Both Orange Slovensko and Slovak Telekom then applied for an extension.

Both of the mobile operators in question said they would now ponder their next steps.

Heated-up debate

The Finance Ministry originally expected to get €10 million for extension of the two mobile licences, Slovak Television reported in its main news programme on August 10. The licence extension fees have been subject to criticism by independent MP Igor Matovič, who believes that the licences are being prolonged for a comparatively negligible sum and that if the state offered them via a public tender it could obtain as much as €500 million, the SITA newswire reported. Matovič blames Transport Minister Ján Figeľ, who submitted a draft bill on electronic communications that would regulate assignment of frequencies via a public tender to parliament too late.

Transport Minister Ján Figeľ said Matovič’s opinions were nonsense.

“Even if we’d adopted the amendment to the Electronic Communications Act a year ago ... both operators would still have had the right to have their licences prolonged, as protection of investments applies in Slovakia,” said Figeľ, as cited by the TASR newswire. “When they made their investments 10 years ago their option to prolong this period was confirmed.”

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