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German Court confirms 3G license revocation with no fee refund

Andreas Grunwald

28 August 2011

The German Federal Administrative Court has issued a final judgment, upholding lower court rulings that the German telecoms regulator was justified in revoking one of the early 3G licenses for failure to meet build-out requirements, without refunding the €8.4 billion license fee.

The German Federal Administrative Court has issued a final judgment, upholding lower court rulings that the German telecoms regulator was justified in revoking one of the early 3G licenses for failure to meet build-out requirements, without refunding the €8.4 billion license fee.

In 2000, the German telecoms regulator RegTP (now renamed BNetzA) awarded six 3G licenses in what was – and still is – the spectrum auction that generated the highest proceeds in German history, some €50 billion in total bids. Among the successful bidders was Telefónica/Sonera, a consortium that intended to roll out a 3G service under the "Quam" brand. However, "Quam" never took off, and Telefónica/Sonera discontinued its German operations in 2002. Eventually, though, Telefónica returned to the German market through the acquisition of O2 in 2005, itself one of the six successful bidders in the 3G spectrum auction and still a license holder.

The 3G licenses issued in 2000 were subject to certain network build-out requirements. License holders were required to cover at least 25% of the German population by December 31, 2003, and 50% by December 31, 2005. When it became clear in 2004 that Telefónica/Sonera would not meet these requirements, RegTP withdrew the license. Telefónica/Sonera challenged the withdrawal in court and claimed repayment of the €8.4 billion license fee. Over almost 10 years, various courts of lower instances dealt with the case, but now, the Federal Administrative Court has issued a final judgment, rejecting the claim.

The Court held that RegTP had the right to withdraw the license. Telefónica/Sonera had clearly failed to meet the minimum coverage obligations, in the Court's view, and there was thus a legitimate public interest to recover the relevant spectrum in order for RegTP to re-offer it to the market. Moreover, because the license was originally conditioned upon an effective use of the spectrum, the Court found no reason for Telefónica/Sonera to claim repayment of the license fee. Quite to the contrary, the Court argued that the license fee was not meant to compensate for the actual use of the spectrum during the license period, but rather, to serve as a means to award scarce spectrum resources to the successful bidders during the auction. This legislative aim would no longer be met if a successful bidder could eliminate the underlying principles of the auction retroactively, by violating the license conditions.

Andreas Grunwald

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