Regional mobile licences will fall in value

Saudi Telecom could have won Bahrain’s third mobile phone licence with a bid of just BD1 ($2.65). Unfortunately for the Saudi firm, it missed out on the potential bargain because it had no way of knowing that the three other companies registered to bid for the licence had all withdrawn from the competition.

The bid-opening ceremony, in the offices of Bahrain’s telecoms regulator, was a foregone conclusion, with only one sealed envelope waiting to be opened.

As it happens, Saudi Telecom bid BD87m ($230m) for the licence, and Bahrain’s Telecommunications Regulatory Authority must be happy that it got that much for it in an uncontested auction.

What happened in Bahrain is being replicated elsewhere in the region. Fewer companies are bidding for new telecoms licences, and those that are can offer less.

Those that are prepared to buy new assets, such as Saudi Telecom and the UAE’s Etisalat, which recently bought a licence in Iran for e300m ($397m), are less willing to spend the massive sums that were routine two or three years ago. Etisalat’s Iranian licence cost a fraction of the $2.9bn that Turkcell paid for its licence in 2004.

At the end of 2008, eight Middle East countries were planning to issue fresh licences. Since then, Jordan and Lebanon have postponed their licence auctions, with the latter blaming the global economic slowdown. Morocco has yet to confirm a deadline for bids for its third licence, although the tender documents have been available since November.

Many of the countries that planned to hold licence auctions were doing so to alleviate pres-sure on public finances caused by the global economic turmoil. Unfortunately for them, that same global downturn has reduced interest in new licences too. For those left in the market, there will be further bargains to come.