OniWay, a Portuguese licensed Universal Mobile Telecommunications System (UMTS) operator, has been handed a favourable decision by ICP-ANACOM, the Portuguese telecommunications regulator, ensuring interconnection with Vodafone's and Optimus's networks and paving the way for the third generation of mobile telecommunications in Portugal.

OniWay - which does not hold a Global System for Mobile Communication (GSM) licence, but is one of four operators that were awarded UMTS licences - had tried unsuccessfully to enter into agreements with its two competitors, which repeatedly refused interconnection. ANACOM had already issued decisions stating that other operators on the GSM market would have to offer such interconnection, but it is only this latest decision which has left the two reluctant companies with little room for manoeuvre.

The new decision comes as confirmation of the tough stance which the previous ANACOM board had adopted, and will enable OniWay to begin operating commercial services through the GSM network of TMN (one of the mobile operators holding UMTS and GSM licences) in the near future. While falling short of imposing fines on Vodafone and Optimus, the decision requires interconnection with their GSM networks for all non-dual mode terminals with General Packet Radio Service (GPRS) functionality. The decision sets out a number of minimum services which Vodafone and Optimus are obliged to interconnect with OniWay's GPRS network, including call termination, short message service termination, voicemail and other information services.

ANACOM's reasoning clearly sets out that it considers that the initiation of GPRS services by OniWay, the only licensed UMTS operator which does not hold a GSM licence in Portugal, will provide a mechanism to ensure a level playing field with the other competitors in the UMTS market and therefore reduce the barriers to its entry. ANACOM also considers this as an important boost for third generation mobile communications, which have been slow to take off.

In this context, ANACOM's decision is conditional on OniWay ensuring the migration of all its clients to UMTS technology by December 31 2003, and on following the rules to which it is bound under the UMTS licence.

In spite of this decision, neither Optimus nor Vodafone has abandoned its endeavours to keep OniWay out of the market. Shortly after the decision was issued, both companies appealed to the judicial courts.A legal battle subsequently began over the effects of these appeals on ANACOM’s decision. Vodafone and Optimus argue that the decision shall be suspended until the court has issued its decision on the matter. This would allow them to continue refusing to grant interconnection to OniWay. On the other hand, OniWay considers that ANACOM's decision must be understood as an administrative decision, the effects of which are not suspended by appeal. ANACOM shares OniWay’s viewpoint, and has warned both Optimus and Vodafone that disregarding its decision may result in the suspension of their UMTS licences for up to two years.In light of ANACOM’s statement, both operators recently declared their availability to enter into interconnection agreements. Nonetheless, according to the latest press reports neither has yet managed to grant effective interconnection, leading OniWay to request further assistance from ANACOM.

For further information on this topic please contact Margarida Couto at Vieira de Almeida & Associados by telephone (+351 21 311 3400) or by fax (+351 21 354 89 39) or by email ([email protected]).