Free gets fourth 3G license in France and could trigger price war

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Free gets fourth 3G license in France and could trigger price war

By CAROLINE GABRIEL

Published: 21 December, 2009

READ MORE: Spectrum | France | Iliad | Broadband | UMTS

France has got its fourth mobile operator at last, and Free Mobile, a subsidiary of broadband group Iliad, was the only bidder. Regulator Arcep awarded a 3G license for 5MHz of spectrum in the 2.1GHz band, at a price of €240m.

As a condition of its award, Free has promised to launch services and host MVNOs within two years, covering at least 90% of the population with 3G within eight years. Free says it will bring new competition to the market, and will differentiate itself mainly by focusing on advanced mobile internet services, and on data pricing. Also, parent Iliad, which also has a national WiMAX license acquired with Altitude Telecom, will be better positioned to develop new bundling options and a quad play.

The remaining 10MHz of spectrum in the 2.1GHz band will be the focus of a new call for applications, open to all players in the first half of next year (this sale was closed to existing license holders Orange, SFR and Bouygues, all of which have objected to the sale and the lower price Free has paid compared to their own 3G license fees. Bouygues paid €619m, which in turn was lower than the price charged to Orange and SFR, though they were later refunded the difference). Arcep also said it was preparing the allocation procedures for 800MHz digital dividend and 2.6GHz bands.

"Iliad is pleased with this decision," the company noted in a statement. "The allocation of the licence will enable the group to extend to mobile communication the technological and pricing innovation dynamics that turned it into a leader for landline telecommunications. The introduction of a fourth network operator will facilitate the emergence of profitable MVNOs and ease mobile multimedia usage take-off, for the benefit of consumers…. By becoming a major mobile multimedia player, in addition to its landline operator activities (ADSL and FTTH), Iliad is now in a position, like its main competitors, to become a major contributor to convergence." Free Mobile said it intends to share network infrastructure with rival operators where possible.

Several other firms, including cableco Numericable, Virgin Mobile and Orascom of Egypt, had considered bidding but pulled out, expressing concerns over the cost and time to build a national network.

"While Iliad is the big winner, there is already a market perception building that there might be a price war in the French mobile market," said Societe Generale analyst Saeed Baradar in research note, adding that this was "not a good day for France Telecom, SFR or Bouygues". The average monthly mobile bill in France is high - about €37, compared to a €25 average across the EU and €13 in the ultra-competitive UK. Analysts think Iliad could get 5% share by 2015.