Italy’s $3.5 Billion Spectrum Sale at Risk as Broadcasters Dispute Payment

Italy, trying to cut its deficit, may be thwarted in a bid to raise 2.4 billion euros ($3.5 billion) by auctioning frequencies, as broadcasters and phone companies resist the “chaotic” sale. Local television channels, who occupy most of the frequencies to be sold, say they may refuse to free the spectrum if the government doesn't offer higher compensation.

Mobile- phone operators, the likely buyers, say the frequencies aren't worth the price if the broadcasters don't allow immediate access. The Italian auction has been handled in “a quite chaotic way,” Tommaso Valletti, a professor of economics at London’s Imperial College, said in an interview. “There’s been a bit of the ‘Wild West’ in the Italian frequency sector. It won't be easy to disentangle.” The broadcasters’ resistance may hamper the country’s deficit-cutting plans and expansion ambitions of mobile-phone operators. Italy, whose credit-rating outlook was lowered on May 21 to negative from stable by Standard & Poor’s, included the expected auction proceeds in its 2011 budget. Operators such as Telecom Italia and Vodafone Group need bandwidth to meet surging data demand as clients use smartphones to watch films and surf the Web.