Identifier
Created
Classification
Origin
05VIENNA2530
2005-07-27 14:24:00
UNCLASSIFIED
Embassy Vienna
Cable title:  

AUSTRIA: TELECOMS UPDATE

Tags:  ECPS ETRD EU AU 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 VIENNA 002530 

SIPDIS

DEPT FOR EB/CIP (TIMOTHY FINTON) AND EUR/AGS
USDOC FOR NTIA - CHRISTINA SPECK
USDOC FOR OTT - JOSEPH BURTON

E.O. 12958: N/A
TAGS: ECPS ETRD EU AU
SUBJECT: AUSTRIA: TELECOMS UPDATE

REFS: A) 04 VIENNA 4102 B) 04 VIENNA 1369

Summary
-------
UNCLAS SECTION 01 OF 02 VIENNA 002530

SIPDIS

DEPT FOR EB/CIP (TIMOTHY FINTON) AND EUR/AGS
USDOC FOR NTIA - CHRISTINA SPECK
USDOC FOR OTT - JOSEPH BURTON

E.O. 12958: N/A
TAGS: ECPS ETRD EU AU
SUBJECT: AUSTRIA: TELECOMS UPDATE

REFS: A) 04 VIENNA 4102 B) 04 VIENNA 1369

Summary
--------------

1. tele.ring, the successful Austrian mobile phone
subsidiary of Western Wireless is for sale following
Alltel's takeover of Western Wireless. Interest in
tele.ring has dropped noticeably after the Lower Austrian
state government imposed a new tax on mobile phone masts
effective January 1, 2006. The tax aims to encourage
multiple phone operators to share masts. High fees,
deficient procedures, and resistance from the incumbent,
Telekom Austria, hamper local loop unbundling. Interest
in mobile number portability in Austria, available since
October 2004, is limited. The development of a Universal
Mobile Telecommunications System (UMTS) in Austria is
disappointing. End Summary.

tele.ring - The U.S. Subsidiary Is For Sale
--------------

2. On June 24, a tender was issued for the sale of
tele.ring, a 100% subsidiary of Western Wireless
International Corp., worth Euro 1-1.5 billion ($1.24-1.86
billion). When Alltel acquired Western Wireless in early
2005, it reportedly decided to focus on the U.S. market
and not maintain Western Wireless' foreign subsidiaries.
The only bidder for tele.ring is Permira, a U.S. private
equity firm. Five interested telecom companies did not
submit a bid or withdrew bids, primarily because of a new
tax on mobile phone masts in Austria's second most
populous state (see paragraph 4).


3. Western Wireless acquired tele.ring, one of four GSM
mobile phone operators in Austria, in 2001. tele.ring
achieved a turnaround in two years and increased its
share in the mobile phone market from 8.7% in 2003 to
11.8% in 2004, according to the Austrian telecom
regulator. Due to a very successful marketing campaign
and aggressive pricing policy, tele.ring doubled its
number of mobile phone customers in 2003 and reported
another 30% increase in 2004.

Austrian State Introduces Tax on Mobile Phone Masts
-------------- --------------

4. On June 21, the state parliament in Lower Austria,
the second most populous state with 1.5 million
inhabitants, approved a bill to introduce a special tax
on mobile phone masts, effective January 1, 2006 and
limited to four years. The tax will be Euro 21,000 per
mast/per year. The tax should yield annual revenues of

approximately Euro 70 million. The state government
noted that there had been runaway growth of masts and
that the tax would be an incentive for site sharing,
i.e., two or more phone operators using the same mast.
The five mobile phone operators -- Mobilkom Austria, T-
Mobile Austria, One, tele.ring und Hutchison "3" -- have
18,141 masts in Austria, of which only 1,194 (6.6%) are
shared sites. In Lower Austria, 12% of the 3,324 masts
are shared sites.


5. Mobile phone operators criticized the new tax and
announced they would pass it on to Lower Austrian
customers, whose phone bills could rise by Euro 100-120
($124-149) per year. Georg Serentschy, Managing Director
of the telecom regulator RTR, objected to the tax on
several grounds: constitutional concerns; hampering
competition and infrastructure development; and
discriminatory disadvantaging of mobile phone operators
because the tax will not affect other mast owners, such
as ORF, the state-run broadcasting company. Many legal
experts have questioned whether the new tax law conforms
to the constitution. The GoA could veto the tax for
jeopardizing federal interests, but it is unlikely to do
so because of political considerations (Note: The Lower
Austrian Governor, Erwin Proell, is a powerful figure in
Chancellor Schuessel's People's Party. End Note).

Local Loop Unbundling Hampered by High Fees
--------------

6. Only 2.5% of the 3 million Telekom Austria (TA) local
loops have been unbundled. Unbundling fees would have to
be 40% lower (Euro 6.71 instead of Euro 10.90),according
to a study presented by the Association of Alternative
Telekom Network Operators (VAT) and the Austrian
Internet Service Providers' Association (ISPA).
Exaggerated costs and deficient procedures impede
infrastructure competition and broadband expansion,
according to ISPA and VAT, which reiterated their request
for an improved regulatory framework for the ,last mile"
competition. Despite numerous court rulings and EU
regulations, Austria remains unbundled. The incumbent,
TA, has blocked and delayed unbundling, according to
ISPA.

Number Portability - Limited Interest
--------------

7. Mobile number portability in Austria, available since
October 2004 (refs A and B),has received limited
interest. By June 30, 2005, only 42,400 (or 0.5%) of the
8.2 million mobile phone numbers have been transferred.
However, the two smallest mobile phone operators in
Austria, tele.ring and Hutchinson "3," report increasing
interest. In June 2005, 20% of new tele.ring and "3"
customers transferred their old numbers.

3G - UMTS in Austria Disappointing
--------------

8. Universal Mobile Telecommunications System (UMTS)
development in Austria has been disappointing. The five
UMTS license holders -- Mobilkom Austria, tele.ring, T-
Mobile Austria, One and Hutchison "3" -- have switched on
their UMTS networks to comply with license conditions and
avoid penalties (ref B),but customer interest is
lacking. Therefore, tele.ring is now pushing an upgraded
UMTS version, the High-Speed-Downlink-Packet-Access
(HSDPA),which it hopes to offer in 2006. HSDPA allows
downlink data transmission of up to 10 megabit per
second.

BROWN