Three bidders chase four licenses in French UMTS contest

date: 24th January 2001, source: Total Telecom

Telefonica and Suez Lyonnaise des Eaux have withdrawn from the French UMTS license contest, cutting the number of bidders down to just three. Following the exit of Deutsche Telekom in November 2000, the announcement leaves only the three incumbent operators pursuing four licenses.

"Both companies consider that the existing license fee does not reflect the situation of the market," Suez and Telefonica said in a statement. They said they will consider further opportunities to work together in the French communications sector.

The French regulator, ART, released a statement to the effect that the process is still open and the deadline is 31 January at midday. A spokesman declined to comment further.

The licenses will be awarded via the beauty-contest method, rather than an auction, and a fixed fee of 32.5 billion francs (US$4.6 billion) each has been set per license. Winners will have to pay half of this fee during 2001 and 2002, and the balance over the following 13 years. In addition, the cost of building a 3G network is estimated at around 5 billion euros.

This compares with £5.964 billion ($8.7 billion) paid by Vodafone for its premium 3G license in the U.K., and an average DM16.4 billion ($7.8 billion) paid by six operators in Germany. However, some European countries, such as Finland, Sweden and Spain, chose to dole out licenses for a negligible cost.

France was criticized by operators both for its choice of the beauty-contest method, thought to be unfair to new entrants, and for the comparatively high prices set.

Deutsche Telekom withdrew from the process in November, saying it would concentrate on regions where it has a mobile customer base and existing infrastructure. This left only four certain contenders: incumbent operators France Telecom, SFR and Bouygues Telecom, plus Telefonica-Suez. ART said at the time it would consider awarding only three licenses if any bidder failed to meet its criteria.

KPN Mobile has expressed interest in the license process, but a spokesman told Total Telecom Wednesday it is "not very likely" that the company will place a bid.

A France Telecom spokesman reiterated that the company will submit its bid at the end of the month, adding that the withdrawal of Telefonica-Suez "does not change anything." A spokeswoman for Bouygues Telecom said: "We have decided not to make any comment about anything related to the UMTS."

top