The Coming Week in Europe: U.K. Mobile-Phone Licenses Up for Sale

LONDON -- Although Europe will be on holiday on Monday, serious investors are unlikely to stray too far from a place where they can find out what's happening in the U.S. markets that day. And that shouldn't be too difficult, because you can now get stock quotes over your mobile phone.

Getting quotes, though, is obviously something mobile phone operators consider to be the thin end of the wedge if you consider the astronomical prices they're prepared to pay for one of the U.K. licenses to build the infrastructure for and operate the next generation of mobile-phone services.

Since the total amount bid so far for the five licenses is now more than four times than originally expected, nobody appears willing to predict when the final hands will be played. But considering that the original field of 13 players has been winnowed down to just seven, the end could come as early as next week.

As of Thursday, the amounts bid were worth 22.2 billion ($35.3 billion) and the remaining bidders were the four incumbents -- Vodafone AirTouch (VOD), Orange, British Telecom's (BTY) BT Cellnet, Deutsche Telekom's (DT) One2One -- as well as newcomers TIW, part of Canada's Teleglobe (TGO) and NTL Mobile, which is jointly owned by the cable company NTL (NTLI)and France Telecom (FTE).

Although the Chancellor of the Exchequer, Gordon Brown, and finance ministers of other European countries planning such auctions are no doubt cock-a-hoop at this unexpected windfall, not everyone is happy, notably Ron Sommer, chairman of Deutsche Telekom.

On Wednesday, following another quarter of disappointing earnings from Deutsche Telekom, Sommer moaned publicly about the "gigantic sums" of money these licenses are commanding. And well may he complain, because if he does win one of the licenses in the U.K., he'll then have to fork out another huge amount for one of the licenses in Germany's upcoming auction.

These comments could be a prelude to One2One dropping out the auction. Then again, the auction is becoming more and more like a game of poker that perhaps one should not read too much into.

The uncertainty over the auction is equal only to that surrounding the state of the IPO market in Europe.

Much was made this week of the success of Deutsche Telekom's spinoff of its Internet business, T-Online, as a sign that Europe's IPO market would soon return to good health. On Monday, the shares were offered at 27 euros each, and despite the perilous market conditions, managed to rise 40% while all around it the markets were falling. The shares were trading Thursday down 0.32 euros, or 0.8%, at 38.65.

However, as TSC reported, Deutsche Telekom's T-Online is one thing, diddleysquat.com is quite another.

"You can bet your boots that Deutsche Telekom used its influence with the larger institutions," says Philip Dumas, head of institutional sales at the investment and research firm Durlacher. T-Online's IPO "was always going to be a success; end of story."

Yet Neil Austin, head of new issues at the U.K. consultancy firm KPMG, believes there may be more concrete evidence that the IPO market will improve. While he concedes that the recent fluctuations in the Nasdaq and the U.K.'s Techmark indices create uncertainty, a market pick-up toward the end of the first quarter indicates a strong pipeline, with most advisers working to capacity on flotations throughout the summer.

And as Dulacher's Dumas points out, "It's pretty difficult to cancel or postpone an IPO, it's probably easier to change the terms and the pricing."

To gauge the uncertainty of the European IPO market, one need look no further than the IPO of the U.K.'s video-on-demand company, Yes Television.

On Monday, Yes TV was due to fix the price for the sale of the 81 million shares, which at the midpoint of the price range would have valued the firm at 810 million ($1.3 billion). However, the turbulence in the markets created by the fall on Wall Street on Friday forced the company to say Monday that it was postponing the issue. Only two days later, however, the IPO was back on, with Yes TV saying it would complete the offering by May 22 within the same price range.

What Yes TV decides to do should the markets begin gyrating again is anybody's guess, but analysts say appearing to be controlled by such external events doesn't do the company's reputation in The City any good.

Perhaps, but then again, uncertainty, it seems, is in no short supply at the moment.

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