DT quits Paris 3G contest

date: 22 November 2000

Deutsche Telekom has pulled out of the contest to gain a third-generation mobile telephony licence in France. The surprise move is likely to be interpreted as good news in particular for Suez Lyonnaise des Eaux, the French conglomerate, which has formed a consortium with Spain's Telefonica to bid for a French 3G licence.

Before Tuesday night's announcement, it had been widely expected that Suez and its partners would face a head-on battle with Deutsche Telekom for the fourth and final licence. The other three licences were expected to go to the three incumbent French mobile operators.

Deutsche Telekom's decision will leave Suez, for the moment, as the favourite for the fourth licence. Kai-Uwe Ricke, head of T-Mobile International, Deutsche Telekom's mobile arm, told Les Echos, the French business newspaper that the company had concluded that without an initial client base the move would be too risky.

"France is, and remains, a very important market, especially for a group with the ambition to be a global player," he said. The decision marks a U-turn for the German operator, which has taken on heavy debts in pursuit of international expansion. Ron Sommer, Deutsche Telekom's chief executive, said in May that his group would apply for a French licence and needed no local partner.

The German withdrawal will be welcomed by Bernard Arnault, the French businessman who announced this week that his Groupe Arnault family holding company was to take an indirect stake in the Suez/Telefonica consortium. The deal was portrayed this week as strengthening Suez's candidacy for a licence.

France has decided against holding potentially lucrative auctions for its mobile phone licences. Instead, the government is allocating the four licences with winners chosen according to the services they plan to offer. The cost of each 15-year licence will be FFr32.5bn, half payable within the first two years of the licence and the rest over the next 13-years.

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