IHS Global Insight Perspective | |
Significance | The existing French operators have fought tooth and nail to prevent the entry of a fourth mobile player, and it is now hoped the ruling will put an end to this resistance. |
Implications | The fiercely pro-competition EU was always likely to reject the appeal, which represented something of a desperate last measure from the operators. |
Outlook | The French regulator is likely to welcome the decision, as it has repeatedly indicated that a fourth mobile player is vital to increasing competition in the sector. |
The European Union (EU) has rejected an appeal by the three major French mobile operators, concerning the allocation of the country's fourth 3G licence to new entrant Iliad's Free, according to a report in La Tribune. The French daily reports that the EU executive arm, the European Commission (EC), has rejected the complaints filed by France Telecom's Orange, SFR, and Bouygues, concerning the way the French government awarded the mobile phone license to Free, based mainly on the cost of the licence.
In their claim, the operators claim that Free, which was awarded the fourth mobile licence at the beginning of the year, will benefit from a number of advantages that did not exist for its rivals when they gained their 3G licences. Free's rivals also complained about the price of the mobile licence, which was fixed at only 240 million euro (US$304 million), compared to the 619 million euro the three existing players had to pay for their 3G licences back in 2006. According to the three plaintiffs, the discrepancy in the prices could be interpreted as a form of state aid, which is illegal in the EU.
La Tribune says the ruling is a preliminary one, and the three plaintiffs have been asked to respond to the decision before a definitive ruling is published. However, the paper quotes EC spokeswoman Amelia Torres as saying the regulator has informed the companies concerned of its preliminary intention not to pursue the case.
Meanwhile, SFR and Bouygues have filed a complaint with France's highest administrative court, Conseil d'Etat, which is expected to come up with a ruling on the matter at end-2010 or in early 2011.
Outlook and Implications
- Iliad Faces Continued Resistance: Iliad's Free, France's third-largest provider of broadband internet, was the only bidder for licence, which was tendered last year and awarded at the end of December. Free will now compete with Orange, SFR, and Bouygues in the mobile market, with all three existing 3G players having put up significant resistance to the entry of a fourth player. Free now plans to launch its mobile offering in early 2012, estimating that its own 3G network should cover 69% of the population by 2015. Iliad recently announced its first-half revenue rose 4.6% year-on-year, driven by key growth in broadband subscribers at Free (see France: 4 August 2010: Iliad Sees H1 Revenue Grow 4.6% on Broadband Growth), while the operator recently secured a fresh mobile spectrum in the 2.1-GHz band, with licences going to Orange and SFR, with Bouygues notably declining to bid (see France: 19 May 2010: Orange and SFR Grab 2.1-GHz Mobile Broadband Licences). However, Free has reportedly experienced difficulties finding a partner to share use of 3G networks, meeting resistance in its efforts to cut a deal with the existing players about the use of their 3G networks (see France: 18 May 2010: Iliad Struggles to Form 3G Partnerships in France—Report). The existing French operators have fought tooth and nail to prevent the entry of a fourth mobile player, and it is now hoped the ruling will put an end to this resistance.
- Further Regulation in the French Market: The fiercely pro-competition EU was always likely to reject the appeal, which represented something of a desperate last measure to block the new entrant. The EC has recently announced plans to appeal against a recent ruling that a 9-billion-euro credit line offered to France Telecom was not illegal state aid, following an EU ruling that the support was not illegal (see France: 18 August 2010: EU to Appeal France Telecom State Aid Decision). Meanwhile, the French internet operators recently called on the French government to compensate them for the cost of enforcing the "Hadopi" anti-piracy legislation, which could cost the industry an estimated 50 million euro a year (see France: 16 August 2010: French ISPs Demand Compensation for Implementing "Hadopi" Anti-Piracy Law).
- Further Increases in Competition Become Inevitable: The French mobile market has remained somewhat stagnant for many years, where a combination of high prices and an underdeveloped prepaid market have kept penetration rates under 100% (see France: 10 May 2010: French Mobile Subscriptions Up 5.6% Y/Y During Q1). However, the effects of the recent recession in the country and a price war now mean the cost of mobile communications is coming down. The French regulator is likely to welcome the EU decision, as it has repeatedly indicated that a fourth mobile player is vital to increasing competition in the sector. Meanwhile, competition in the bundled services sector is growing, with incumbent France Telecom recently getting the go-ahead by the French regulator to begin cross selling mobile and fixed-line services, making the marketing of quad-play bundles a possibility (see France: 15 June 2010: French Competition Watchdog Approves France Telecom's Quad-Play Ambitions). Elsewhere, following years of delays caused by regulatory uncertainty and wrangling between the operators, fibre-optic roll-out in France is finally gathering serious momentum after the French government announced significant investment in rollout to ensure the continued spread of infrastructure (see France: 12 July 2010: Numericable Calls for Further Government Support for Rural Fibre Roll-Out).