Telefonica Czech Republic has filed a lawsuit against 4G auction conditions set by the Czech Telecommunication Office (CTO), the national regulator, on the grounds they unfairly favour market entry of a new operator.
The operator’s main grievance is the reservation of 800MHz spectrum for a new entrant. It describes the measure as “unlawful interference” and “unauthorised state aid”.
Telefonica’s Czech unit said in a statement that CTO had ignored its reservations about the auction rules; failed to provide justification for reserving 800MHz spectrum; and that it “did not submit the newly-announced auction rules to the proportionality test”.
The operator further pointed out that a similar regulatory approach in Hungary – to reserve spectrum for a new entrant – resulted in the measure being repealed after similar legal action. In neighbouring Slovakia, added Telefonica Czech Republic, 800MHz spectrum is not exclusively reserved either.
CTO’s decision to offer 800MHz spectrum exclusively to a new operator was taken in April as part of a redesigned multi-band auction (comprising 800MHz, 1.8GHz and 2.6GHz frequencies).
The regulator had taken the unusual step of scrapping the previous auction because bidding had become too frenzied.
Under new auction rules a block of 2x10MHz in the 800MHz band is reserved for a new player. The 1800MHz block originally reserved for a new operator was increased from 2×15.6MHZ to 2×15.8MHz.
Yet Telefonica argues that the intense bidding in the previous auction demonstrates how unnecessary it is to create more favourable conditions for a new operator. “There is at least one entity on the Czech market, which is – without any state aid – capable of entering the market as an adequate competitor to the existing operators,” said Telefonica.
The Czech investment group PPF is likely to be on Telefonica’s mind here, which took part in the previous auction. However, today (30 September), the same day as Telefonica’s lawsuit was filed at the Municipal Court in Prague, PPF said it wouldn’t be bidding in the next auction. The company, reports Reuters, said it was opposed to CTO’s condition forbidding it to merge with another auction participant for the duration of a 15-year period.
Telefonica’s lawsuit also complains of “undue interference with the rights of existing operators by imposition of the obligation of national roaming in favour of a new entrant”.
The operator accuses CTO of not having completed detailed market analysis to justify interference in wholesale pricing, and that such interference can only be imposed if there is proven market failure – something which Telefonica believes is not the case.
Despite being critical of the auction rules, Telefonica Czech Republic still seems keen to take part.
“We are challenging some conditions but that does not mean we are not joining the auction,” a company spokesman told Reuters.