Big two get off lightly in licence renewal requirements

22 Mar 2004

France’s two biggest cellcos Orange and SFR breathed a collective sigh of relief on Friday following an announcement by country’s finance ministry that it will impose a 1% tax on their revenues, and not the 5% premium the pair had initially feared. Further good news came with confirmation that the licence fee will also be considerably less than first mooted. The new tax will apply once each operator renews its GSM licence. Orange and SFR’s 15-year concessions expire at the end of March 2006, whilst the licence of market’s third operator, Bouygues Télécom, is up for renewal three years later. The ministry also announced that the licence renewal fee will be set at EUR25 million, far less than the EUR45-60 million predicted earlier. The ministry explained that cost of the licence has been limited because of the operators’ financial obligations to meet reinforced territorial coverage requirements – all of the 3,200 communities that currently lack services must be covered by 2007 – and appease customer demands for a reduction in tariffs.

Whilst Orange and SFR are believed to be satisfied with the new regulations, Bouygues Télécom, the country’s newest and smallest operator, is likely to be disappointed with the outcome. Despite issuing a statement describing the new requirements as ‘fair’, privately Bouygues is expected to be upset that it has not been treated differently from its two bigger rivals. Bouygues claimed less than 16% of French mobile customers at the end of 2003 – up just 0.75% year-on-year – and had proposed that the tax on its turnover should be less than that imposed on Orange and SFR to reflect its inferior position in the market and allow it to become more competitive. Orange has indicated that whilst its costs will increase as a result of the new terms, it does not expect these costs to be passed on to consumers.

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