BERLIN -- Europe may be only halfway through allotting licenses for third-generation wireless services in its four largest markets, but the region's major telcos are already reeling from the effects of the U.K. and German auctions.

Bringing in $35 billion and $50 billion respectively, the auctions in Britain and Germany have sent telcos scrambling for cash to help foot the bill for UMTS, or Universal Mobile Telecommunications System, the standard to be used in Europe for snazzy multimedia cellular services. With France and Italy still to distribute licenses, many of the biggest telecom operators are facing downgrades of their credit ratings from the likes of

Standard & Poor's

and

Moody's

.

Such downgrade concerns led

British Telecom

( BTY) earlier today to postpone a roadshow for a $10 billion bond offering originally slated to begin Sept. 5. British Telecom evidently chose to wait for decisions by the ratings agencies before pressing ahead.

The delay would be the first for a major telco in the wake of the pricey German auction, but perhaps not the last.

Telefonica

(TEF) - Get Report

plans to issue about $5 billion of bonds next month. But the Spanish company and its Finnish partner,

Sonera

( SNRA), which together obtained a German license via their 3G consortium, are considered strapped for cash and also face pressure on their credit ratings. The prospect of increased costs of capital via the debt markets may force telcos to spin off assets and issue new shares to finance the expected huge outlays for UMTS networks.

Analysts became concerned about British Telecom's debt levels after it

announced it was buying majority control of German wireless operator

Viag Interkom

from utility

E.ON

( EON) last week. E.ON decided the high cost of a German UMTS license no longer made it economical to hold onto its 45% stake. BT is paying nearly $7 billion for E.ON's stake and will now have to cover another $8 billion plus change for the license alone. BT shares ended down 31 pence, or 3.7%, to 810p ($12.04) on Tuesday. On the

NYSE

, the ADRs were down 4.6% at midday to 121 3/16.

"Clearly

the Viag acquisition represents gearing at full stretch even before the cost of rolling out the German 3G network is considered," claims Justinian Clifford-Bowles, an analyst for

Commerzbank

in London. (Gearing is the ratio of long-term funds with fixed interest that makes up a company's capital and the higher it is the more speculative a firm is considered. It is the U.K. equivalent to a debt-to-equity ratio.) "Strategically the deal makes sense,

but it heightens concerns on BT's cash situation." Commerzbank rates BT a hold and does not have an investment banking relationship with the company.

A similar fate is plaguing the Netherlands'

KPN

( KPN), which lost its bidding partner

Hutchison Whampoa

just after the auction ended. Hutchison pulled out due to the high price and small capacity of the license KPN's German mobile unit

E-Plus

had obtained.

On Tuesday, KPN's CFO said the company was aiming for a single "A" credit rating over the medium-term, which would just keep the telco above the credit level that would result in a sizeable increase in interest costs. The executive said KPN would look to float its mobile unit and to a share sale in coming months to help fund its UMTS costs. KPN fell 1.05 euros, or 3.4%, to 30.20 ($27.22) Tuesday, after

Morgan Stanley Dean Witter

cut the price target for the company to 50 euros from 75 amid concern over 3G costs.

Deutsche Telekom

( DT) will also look to an initial public offering of its wireless unit

T-Mobile

next year to pay some of the massive UMTS bill. Deutsche Telekom's credit rating has come under scrutiny ever since it made a $50 billion bid for U.S. wireless operator

VoiceStream

(VSTR)

. If Telekom's rating fell to BBB+, it would have to increase the coupon on its recent gigantic $14.6 billion bond issue.

But Deutsche Telekom may get shut out of both the upcoming French and Italian UMTS "beauty contests," in which the governments get to pick the operators they deem fittest, thereby limiting their 3G expenses. That, however, could irk investors as much as more 3G costs, as Deutsche Telekom would then be unable to become a truly pan-European UMTS operator.