The City Editor

By THIS IS MONEY
Updated:

 

Mobile phone enthusiasts have so far bid more than £17 billion for the five new licences on offer from the Government. That means the Treasury stands to make more money from this auction than the last Government raised by selling off all its water and electricity assets combined.

The water boards and the electricity distributors were each sold off for £5.2 billion while the generators delivered around £6 billion to the Conservatives' coffers.

BP, the biggest single company to be privatised, raised a paltry £7.2 billion for the woman who virtually created privatisation, Margaret Thatcher.

The money being offered for the next-generation mobile phone licences puts the current Government in a delicious position. Eight contenders remain for the five licences so there is every chance that the bidding will go up by several billion pounds more.

The story so far is concrete proof that open auction is a far more lucrative process than the sealed-bids mechanism used by previous governments. In the bids for Channel Three television, for instance, Central got away with offering a couple of thousand pounds for its franchise, simply by good fortune.

Such potential does not exist in the mobile phones race. Bidders have employed professional poker players to help them make the right moves and so far the bids have outstripped Government expectations by about £12 billion.

In the United States, similar processes have bankrupted new licensees and their licences have had to be revoked. In Europe, winners have come to their senses post-auction and complained about overpaying.

The Government has chosen not to sound forth on these problems or to question the wisdom of using gamblers to help out in a serious business auction.

Its silence is understandable. Although the Treasury has said it will use the auction proceeds to pay down the National Debt, it cannot fail to use some of the money for other, more public causes.

This auction has underwritten Labour's victory in the next General Election. No wonder it has not criticised the bidders' behaviour.

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