Vodafone Group would have to pay US$578 million to upgrade its second-generation mobile license in Egypt to a 3G license as a knock-on effect of the price paid by a rival for Egypt's third mobile license earlier this week.

A Vodafone spokesman told Dow Jones Newswires Thursday that the sale of Egypt's third mobile license to Etisalat, for $2.89 billion means it will have to pay $578 million to upgrade to a 3G license in the country.

MobiNil - owned by Egypt's Orascom Telecom Holding and France Telecom - also operates mobile services in Egypt. Vodafone is ranked number two in the country.

The Egyptian National Telecom Regulatory Authority said 20% of the winning bid for the third license would represent the cost of a 3G license, and that any other operator wishing to upgrade to 3G would have to pay the same amount.

That means operators in the country wishing to upgrade to 3G will have to pay $578 million to do so, according to calculations by Stefan Zehle, chief executive of telecom consultancy Coleago.  A Vodafone spokesman confirmed that was the case.

"For us - yes. And it's the same for any other operator as well. That's the benchmark for people that want to operate 3G (in Egypt)," the spokesman said, referring to the figure of $578 million.

Coleago's Zehle said: "It's a hefty amount - and it doesn't stop there." Zehle said in addition to an upfront 3G license fee, operators would also have to pay annual royalties. The Vodafone spokesman said the company has indicated it plans to roll out 3G services in Egypt but hasn't disclosed a timetable for doing so.

On April 2, Ian Gray, chief executive of Vodafone Egypt, told Dow Jones Newswires that Vodafone Egypt would consider applying for a 3G license when the government made its terms clear. "We are the leaders of 3G globally but we need to wait and see the terms that the Egyptian government will specify for application and then decide," he said.

Cellular News