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Hi Bhhurd, and thanks for your post.

Many observers have questioned the way the auctions have gone, but I agree somewhat with the previous poster that the companies in question seem to be more than willing to absorb these costs, and there must be a reason.

Some of those reasons are:

First, they expect penetration rates to get much higher, not stay the same as you suggest. In Germany, if I recall correctly, the numbers of cell phone users are relatively low right now.

Secondly, with always-on wireless connections to the Internet, which is what 3G promises, and billing potentially based on packet size, rather than length of time connected, carriers are expecting to get larger monthly fees, and indications are that they probably will -- users of DoCoMo's i-mode have higher bills than their voice-only counterparts.

Finally, they expect to get money from more than just connection time. Whether they're right or not is up in the air, but a lot of these companies expect to get a cut of mobile commerce and other services.

I do agree with you though, that, it would be risky to invest in the carriers right now, simply because they've laid all this money out while people are still figuring out how to make money from wireless services. That's (partly) why stocks for companies such as Deutsche Telekom and other European telcos have been hit pretty hard recently.

Incidentally, I believe a lot of the European countries got the idea from US auctions of spectrum in the early '90s, for what it's worth :-).

Fool on,

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