Connected Research

Union policy research in the 21st century

French companies complain about 3G licences

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Both Vivendi, the second largest mobile operator in France and part-owned by Vodafone, and Bouygues Telecom, the third largest, have complained to the French courts over the licence conditions and tender process for the award of the fourth 3G licence in France. Applications for the licence close a week today, 29 October.

The focus of the complaints is the fee for the licence, set at €240m compared to the €619m the other three licence holders have paid. (And this was heavily reduced, in the case of the largest two operators and after the threat of legal action on the grounds of state aid, from the fixed fee of nearly €5bn they first paid when the licence process was concluded not long after the end of the auction processes in the UK and Germany back in 2000). France Telecom/Orange, the largest operator, has also previously threatened a reference to the European Commission on the grounds that the cheaper 4th licence amounts to illegal state aid (as indeed previously has Vivendi).

Clearly, the state aid argument is going to run – having worked in the favour of operators once before in the same context, why not try it again? – and a (further) reduction of the licence for all is the most likely outcome if it is found to hold water at EU level. This might first have to happen, as the French government is unlikely to want voluntarily to make further concessions to what is already, on the basis of there being only one confirmed bidder for the licence even at €240m, a rock-bottom price. Of course, other bidders may yet emerge but most seem to have already ruled themselves out of the bidding. Consequently, this seems likely to be close to the price that ‘the market’ would pay at this point – an important consideration in defining whether a licence sold cheaply now, at this price, really does constitute state aid. At the same time, despite the obvious level playing field arguments of having licence prices all set at the same figure (or, at least, all operators bidding at the same time and to common rules they all know in advance), the advantages to the existing holders, both of exploiting what they have already paid for and of thus being able to build a market position which can be used against incomers, are not to be under-estimated.

The French 3G licensing process has already been long drawn-out – not to say a costly and embarrassing one – and it looks as though it has significantly further to run yet.

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Written by Calvin

22/10/2009 at 3:38 pm

Posted in Telecoms regulation

Tagged with , ,

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