License award process for 3G and 2G

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1 License award process for 3G and 2G Clarifications on issues raised by interested parties regarding the Information Memorandum In what follows, EETT wishes to provide clarifications on issues raised in the responses of interested parties to the Information Memorandum. The answers include short explanations of policy decisions, clarifications regarding the process itself and responses to recommendations made by respondents. No answers or comments are provided for issues that according to the opinion of EETT are covered adequately in the Information Memorandum. Interested parties should note that this document, although prepared with appropriate diligence, is not legally binding and is provided only as a means of early communication to Interested Parties of issues that are deemed important in the process of preparing their business cases for the forthcoming auction. The Invitation to Tender, which will be published on the web site of EETT ( on Friday June 1 st, will be the legally binding document. Interested parties therefore are invited to base their final decisions on the Invitation to Tender document only. 2G Licenses coverage requirement Question: If we do not build a 2G network what are the implications? Answer: Although there are no roll out requirements attached to 2G spectrum awarded to 3G New Entrants and Incumbents, the clause of Use it or Loose it still applies in accordance to Law 2867/2001. According to this clause, an operator has to prove within 2 years of being awarded the license that he uses the awarded radio spectrum. Question: Coverage requirement should be much higher for 2G New Entrant and should be prerequisite for roaming Answer: Please note the Decision of EETT of May 30 th 2001 on roaming policy and the roll out requirements for 2G New Entrant in the forthcoming Invitation to Tender. 2G Licenses duration Two recommendations were made by interested parties! That the duration of the new 2G licenses should be 20 years! That the duration of the current 2G licenses be extended to match the duration of the ones to be awarded in the current process Answer: After reviewing both of the above recommendations, EETT sees no reason to alter the rules already defined in the Information Memorandum. Re-farming 1

2 Question: Details on how EETT will handle the issue in the future. Answer: The process of re-farming will be undertaken according to the provisions of Law 2867/2001 article 7 par 7. Question: Will it be possible to use 2G bought now for 3G Answer: Yes, under the condition that an overall decision on re-farming is taken according to Law 2867/2001, article 7 par. 7. Question: In case of re-farming, proper consultation and compensation is requested Answer: EETT will consult the market before any decision on re-farming is taken. The process of re-farming will be undertaken according to the provisions of Law 2867/2001, article 7 par. 7. Roaming Questions! Clarification requested, as roaming is essential for a New Entrant! Request effective enforcement process. To cover 2.5G services as well! Clarification required before the Invitation to Tender! Should be conditional. Answer: As stated in the Information Memorandum, Law 2867/2000 imposes on telecommunication organisations that provide mobile public telecommunication services, the obligation to enter into national roaming agreements the latest by the end of year EETT published a Decision on May 30 th 2001 in which the framework for national roaming agreements was set. In setting the framework, EETT considered the main policy objectives reflecting the original intent of the mandatory national roaming agreements imposed by Law and took into account the special conditions prevailing in each segment of the market. 3G Coverage requirements Question: Data rates may not be feasible technically Answer: The provision for data rates is set under the condition of technical equipment availability. Question: Not clear definition of Olympics coverage requirement Answer: Please note that the geographical coverage requirement for the Olympic Games is limited to the Attica region. Question: Is there a problem by the fact that one of the Incumbents is official Donor of the Games? Answer: No Unalloted 2G spectrum Question: Clarify the process. Answer: No new 2G licenses will be awarded in the future. 2

3 Unalloted 3G spectrum Questions:! Compensation to be offered if deadlines change.! Policies for awarding unalloted spectrum should be included in terms of licenses Answer: The policy on unallocated 3G spectrum will be part of the Invitation to Tender document. New 2G entrant Question: Restrict 2G only to 3G winners Answer: The existing legal framework, would not allow the prevention of a New 2G Entrant from entering the market. Question: Low coverage requirement for 2G New Entrant. With roaming available, equivalent to MVNO Answer: Please take note of the recent Decision of EETT on roaming and roll out requirements in the Invitation to Tender document. It is stipulated there, that a New Entrant in 2G has to build a network covering at least 20% of the population before he is entitled to roaming and that the rollout requirements are in terms of population coverage 25% until 2003 and 50% until G Reserve prices Question: Too high in comparison to Europe Answer: EETT formed its decision on reserve prices based on the prospects of the Greek Market, which is unique in Europe both from the revenue and the cost side of the investment in 3G infrastructure. Question 3G reserve prices not consistent with EU Decision 128/1999 Answer: EETT is satisfied that its decisions abide fully to the EU Decisions. License Fee as percentage of turnover Questions:! Not able to compute it. Renders valuation impossible! Amounts to doubling the reserve price. Unjustified.! Difficult to distinguish 3G from 2G revenues! 0,5% is recommended. Answer: EETT took note of the comments made by interested parties, and will withdraw the royalty component of 2% applied to the turnover of the licence fee. Please see the forthcoming Invitation to Tender. Payment terms Question: 2G payment terms should also become better Answer: The payment terms for 3G Licenses are by far the best terms offered by any European country and reflect fully the uncertainty of the cash flows from 3G during the early years of operations. This is not the case in 2G, where the cash flows are less risky and the market is stable and mature. 3

4 Question: Recommendation that an advance payment of 40% is paid for 3G licenses awarded at any stage. 100% for stage 3 is too much Answer: Different payment terms for different number of licenses awarded reflect the opportunity cost in terms of social welfare of having less competition in an industry with a lower number of operators (and more in one with a higher number). 3G Process Question: Deadlines too close. Not enough time to prepare. Answer: Please note that EETT plans to abide fully by the Timetable presented in the Information Memorandum. Question: Multiple bids not transparent Answer: Multiple bids are fully transparent and beneficial for Bidders as they offer them the opportunity to revise their strategy. They also have the advantage that they render possible collusive behaviour more difficult. Question: Would prefer multiple round process Answer: After having reviewed the licensing procedures followed by European countries, EETT observed that all multiple round ascending auctions resulted in extremely high licence fees. Therefore, EETT believes that the current auction design is the most appropriate for the Greek licensing process. Question: A New Entrant has the option of forcing a 3- license industry. Answer: A New Entrant has strong disincentives for forcing a 3 License Industry. The main one is that, by being a New Entrant, one can reasonably assume that he has a severe disadvantage in his business case compared to Incumbents and therefore a lower valuation for the License. The second is that by not participating in Stage 1 of Phase 1 of the 3G Auction, he loses in Phase 2 of the 3G Auction the opportunity to purchase additional spectrum segment at a preferential reserve price. Please note the process in the forthcoming Invitation to Tender Document. Question: Whole process not abiding by Decision 128/99 of the EU Answer: EETT is satisfied that its decisions abide fully to the EU Decisions. Question: May end up with Incumbent not earning a license. Answer: This is correct. This has happened elsewhere in Europe (i.e. Sweden, France). Question: No due process exists for raising objections to the process. Answer: The Invitation to Tender provides process for raising objections. Please note Article 2.7 of the Invitation to Tender Question: Number of licenses offered not consistent with views as expressed in Consultation. Answer: The process is faithfully designed to accommodate the views expressed in the Consultation process on the optimum number of licenses in the Greek market, where the respondents expressed the view that the number of UMTS licenses should range between three and four. More specifically, the responses to Question 8 of the Public Consultation where as follows: Four (4) out of eight (8) respondents expressed 4

5 the view that the Greek market can sustain up to four (4) licenses. Two (2) out of eight (8) believed that three (3) licenses are the maximum, and one (1) out of eight (8) opted for a market between three (3) and four (4) licenses. One (1) respondent did not express an opinion. Question: Process may lead to only a New Entrant winning a license. Answer: Please note in the forthcoming Invitation to Tender that the process may end up with one license being awarded, no matter whether the winner is an Incumbent or a New Entrant. Also note that any bidder who submits a valid bid in stages 2 and 3 of the 3G auction is awarded a license. Question: Should a separate participation letter of guarantee be presented for each process? Answer: No, Applicants should submit only one Letter of Guarantee for participation. This will cover their participation to both the 2G and 3G award processes. 2G process Question: Is it possible that a bidder offers the highest Bid for one segment and is not awarded the spectrum? Answer: It is possible that the highest bidder for two spectrum segments wins over the highest bidder for a single spectrum segment. 3G additional spectrum Question: A New Entrant may win two segments at low prices Answer: A New Entrant who won a basic License at Stage 1 of the 3G auction, may win only one additional spectrum segment at a preferential reserve price. Please refer to the forthcoming Invitation to Tender where this issue is fully clarified. GSM spectrum clearance Question: EETT should guarantee clearance. Otherwise compensation requested Answer: EETT will enforce clearance of spectrum if required Collocation Questions:! Incentives requested for collocation! Legal enforcement of rights of way for antennas Answer: Please refer to the relevant section of the Information Memorandum. 2G reserve prices Question Reserve prices for NE very low. With GRD 2 Bn any company could become an operator Answer: Please note in the forthcoming Invitation to Tender document that this issue has been clarified. The minimum a New Entrant would have to pay for 2X10 MHz of GSM spectrum (2X5 EGSM and 2X 5 DCS, or 2X10 DCS) is 7 Billion GRD. 5

6 Question: Whole process not according to Law 2867/2000 Answer: EETT is satisfied that the Licenses Award process is conducted in a way that is fully compatible with the provisions of Law 2867/2001 Point to Point Microwave Links Question EETT should ensure availability by opening new frequency bands ETSI channeled Answer: EETT will ensure that the necessary capacity to support backhaul connections between base stations and other points of the UMTS network via microwave point-to-point links will be made available to successful Bidders. Infrastructure sharing Question: Request special treatment for New Entrant Answer: No special treatment for New Entrants is provided regarding infrastructure sharing. Question: Would like to extent the 2 networks clause further to 1 network in each area Answer: EETT has stated in the Information Memorandum its intention to allow the operation of one network in remote areas, provided that operators have met their coverage requirements and competition is not infringed. Please note the Draft License in the Invitation to Tender document. Question: Is there any form of sharing that the EETT would reject from the outset Answer: None, provided that 3G license holders have met with their own networks the roll out requirements by year 2006 as presented in the Information Memorandum. Question: Clarify the areas where 2 networks are permissible Answer: 3G license holders will have the opportunity to select the areas as soon as they have met their roll out requirement as above provided that the requirements of the Law are met. Ownership rules Question: Need to ensure that no two state controlled companies are awarded licenses Answer: Please refer to the relevant definition in the Information Memorandum, where it is clearly stated that two Bidders who are controlled by the same entity cannot both win a license. Question: New entrant definition needs clarification. Answer: It is clarified that an enterprise that has no Economic interest at all on an Incumbent, is a New Entrant. EETT plans to post on its web site explanatory diagrams. Question: Do ownership rules apply for both 2G and 3G processes? Answer: Yes. 6

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