France to split fourth 3G licence into 5MHz lots

13 Jan 2009

The French authorities have opted against awarding the country’s fourth and final 3G mobile licence to a sole bidder, preferring instead to split the blocks of frequency on offer into three lots of 5MHz, with one reserved for a new market entrant. Prime Minister Francois Fillon announced that the government would ring-fence one block of available frequencies when it launches the tender for the licences next month; the radio spectrum is expected to be allocated before the end of the year.

In September 2008 the telecoms regulator Arcep announced plans to re-launch its campaign to issue a fourth and final 3G mobile licence via a new competitive tender process. In 2007 the watchdog tried and failed to auction off the concession when domestic broadband operator Iliad’s sole bid, through its mobile unit Free Mobile, was rejected for failing to meet the financial conditions of the award. In a statement underlining decision no. 2007-0862, adopted in October 2007, the watchdog said ‘the candidature of Free Mobile cannot be retained under the financial conditions currently defined in the law’. As a condition of its bid, Iliad said it believed the success of the fourth mobile operator was dependent on the winner being allowed to make a deferred annual payment of the licence fee instead of an upfront one-off payment of EUR619 million. ‘Iliad believes that a single payment of the rental charge represents a barrier to entering the market,’ the company said.

Although the authorities’ decision to split the frequencies into blocks has greatly increased the likelihood of a new player entering the mobile market, it is unclear how anyone can make great capital from such a small 5MHz allocation. Moreover, with only two blocks open to bidding from the three incumbent operators – Orange France, SFR and Bouygues Telecom – all three firm’s shares dropped following the PM’s announcement. On a more positive note, the news will no doubt be welcome to Iliad which is still keen to enter the domestic mobile market in some form or other.