Orange hangs up on internet telephone auction

Telecoms company Orange has pulled out of the auction for the new internet telephone licences - before the bidding has even started.

Telecoms company Orange has pulled out of the auction for the new internet telephone licences - before the bidding has even started.

Orange refused to say why it has withdrawn, but its move is likely to spark speculation that its parent, France Telecom, is feeling the pinch following the £27bn it shelled out for Orange and the expense of bidding for a third-generation mobile licence.

It is understood that France Telecom is now seeking a £3bn loan on top of its existing debt and has put back the date for the £50bn flotation of its mobile arm, which includes Orange, until next year.

An Orange spokesman said: "Orange is moving forward with alternative-access technologies, but it is inappropriate to comment any further on the specific reasons for the withdrawal."

The auction, which is expected to raise over £2bn for Treasury coffers, will see the sale of 42 separate licences in England, Scotland and Wales.

The licences - which are called broadband fixed wireless - offer an alternative to the last mile of copper wire from BT's exchanges to homes and businesses.

As well as Orange's mysterious withdrawal, an uncertainty surrounds the success of some of the 11 other potential bidders. The Government had planned to launch the internet auction tomorrow, but has now postponed it for around two weeks.

A spokesman for the Department for Trade and Industry said: "The auction will be resumed in the next few weeks. The delay has been caused because some of the parties that had applied to bid in the auction have not met the pre-condition criteria."

The DTI would not reveal which parties were involved. But a source close to the Government said the DTI wants to make sure that the bidders don't have any links which could pose a competition question.

Other companies that have applied to bid include Energis, Norweb Telecom, Atlas Communications and Winstar. Bidding is expected to be especially fierce, following the debacle over opening up BT's monopoly on the cable to provide high-speed internet access - known as the "local loop".

Because telecoms companies have been told that they will not be able to use the loop in every region of the country, broadband fixed wireless is now being seen as a viable alternative.