Successful bidders for four new mobile phone licences will pay fees to the Exchequer over 15 years rather than face big upfront costs. They will also be encouraged to share the cost of building networks in a competition due to be completed by June.
The so-called third generation licences (3G) will enable companies to deliver multimedia services to mobiles using technology that enables devices to download data at speeds significantly faster than are currently possible.
The structure of the competition includes more deferred payments than expected and will result in a net inflow to the Exchequer next year significantly below the £600 million (€762 million) initially sought by the Minister for Finance, Mr McCreevy.
Four successful bidders will pay a total of £115 million in the first year, followed by a moratorium on payments for several years. The outstanding fees of £195 million will be paid over the following 15 years.
Firms can bid for one A licence at a total cost of £40 million. Of this, £10 million will have to be paid upfront - with nothing more due for a further five years. Three type B licences are also on offer at a cost of £90 million each - of which £35 million will be paid at the outset, followed by a three-year moratorium.
Successful bidders will be chosen in a "beauty contest" which will evaluate criteria such as quality of service, coverage and the speed at which companies intend to "roll out" the service.
Announcing details of the competition yesterday, telecoms regulator Ms Etain Doyle said the "innovative fee structure" was devised in response to difficult market conditions and the large expenditures required to develop third generation (3G) services.
Using an industry discount rate of 9 per cent, the present cost of the licences over the lifetime of the A licence was just £21.6 million, and £58.1 million each for the B licences, Ms Doyle said.
The competition will encourage network-sharing among operators to cut down on the huge costs of building 3G networks.
Ms Doyle announced a five-year extension to the lifetime of a 3G licence, which will now last for 20 years. Operators will also face more flexible roll-out obligations, with successful bidders not expected to offer widespread coverage until the end of 2005.
She said she was pleased her office had reached agreement with the Minister for Finance following a year-long delay caused by a difference of opinion on the price to be charged for each licence. Mr McCreevy wanted to maximise the return to the Exchequer from the sale of the licences, while Ms Doyle sought to encourage more competition in the mobile market.
Last night, Mr McCreevy said he always wished to see a balance being struck between the need to ensure that the fees adequately reflected the value of the licence issues, and the importance of 3G to the development of telecoms infrastructure in Ireland.
Despite the concessions to operators, the largest Irish mobile firm, Eircell Vodafone, expressed concern yesterday that the fees were too high. The firm said the high licence fees, with payments staggered into later years, would restrict the ability of operators to reduce tariffs in later years.
An Eircell spokeswoman also highlighted a €2.2 million (£1.73 million) annual charge payable by operators for 3G spectrum, and an administrative fee of €5.2 million to be paid by successful bidders.
