The French telecoms regulator ART has decided to award 3G licenses to the two largest operators.
French telecoms regulator ART today recommended that the government should award 3G licenses to SFR and France Telecom, for E4.95 billion each. The regulator will also hold a new round of bidding for the two unsold licenses in early 2002, with the same entry fee. It also recommended easing operators’ payment terms.
ART had been rumored to be canceling the process, instead holding a new contest. The aim would have been to ensure more than two licenses were sold without alienating the two actual bidders, after the other potential candidates – particularly third-largest mobile operator Bouygues – pulled out.
The decision to go ahead is good news for SFR and France Telecom. They will pay substantially less for their licenses than players in Germany and the UK. Now the uncertainty over the process is over from their point of view, they can focus on building out their networks – and they won’t face competition from rivals with cheaper licenses. The easing of payments, changing the fee that must be paid up front from a half to a quarter of the total cost, will also ease balance sheets.
However, the French government and people may not do so well. The question is whether easing the payment terms will entice any of the bidders to come back. If not, then the resulting cozy duopoly will likely slow mobile Internet development in France and mean higher consumer prices.
Bouygues may well bid for a license now. Datamonitor believes it will take mobile operators seven years to break even from the start of network roll-out; if Bouygues bid, apart from the quarter upfront its payments for the first five years would be similar to the annual cost a GSM license. This makes a bid much more attractive than before.
It looks unlikely, though, that other players will enter. Without the customer base and existing commitments of an incumbent, starting a new 3G network looks like a highly risky operation – and European players are scaling back their expansion plans. The French may have to make do with three operators.
