Bidder blinks as auction hits £10bn

The money on offer for the next generation of mobile phone frequencies hit £10.1bn yesterday, a sum that caused the first telecoms group to blink in 91 rounds of bidding.

The money on offer for the next generation of mobile phone frequencies hit £10.1bn yesterday, a sum that caused the first telecoms group to blink in 91 rounds of bidding.

As bids for the five licences under auction advanced £1.5bn yesterday, Crescent, a consortium backed by US carrier Global Crossing, became the first bidder to waive its participation since bidding began four weeks ago. Analysts said they were unsure whether Crescent's exercise of its first of the three waivers granted to each of the 13 bidders was significant, or just a tactical manoeuvre designed to sniff out rival's tactics.

Yesterday's bidding coincided with warnings from one City expert that the auction, now expected to raise in excess of £15bn for the Treasury, is imposing a tax on what may become the most common way of accessing the internet.

"There is a risk that the UK government is strangling rather than supporting development of the internet," said Mark Lambert, analyst with Merrill Lynch. Similar auctions in the US have seen the industry scrimp on investment, leaving networks with poor coverage and service. One US company, Nextwave Telecom, went bankrupt after spectrum auctions in 1997.

Yesterday Vodafone returned to the fore with a £2.3bn bid for licence B. SpectrumCo led with an offer of £2.1bn for licence A, reserved for a new entrant. One surprise is the three licences with less spectrum are drawing bids only just below those received for licences A and B. WorldCom and Telefonica held pole positions for licence C and D respectively with bids of nearly £1.9bn. NTL Mobile, an arm of the cable group, led the race for licence E with an offer of almost £2bn.