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Follow UsThe French government had after many announcements finally decided that instead of the single 15MHz licence which was initially proposed, it has decided to split the spectrum into three lots of 5MHz, with one lot being reserved for a new entrant.
Julien Grivolas, principal analyst at global advisory and consulting firm Ovum, contends tat the potential entry of a new 3G player in France has seemed to be a never-ending story, with the risk that the market would see no newcomer.
"The decision to finally allocate the spectrum in three lots of 5MHz has two main advantages," Grivolas says.
"Thanks to the reserved spectrum, it still provides an opportunity for a new entrant. Free, a long-declared candidate, has reportedly welcomed the French government’s decision. The fact that the two remaining 5MHz lots are available for bids from all players may increase the value of the bids and bring welcome money for the French government in challenging times.
The French government must now wait and see whether the total amount it receives will come close to the €619 million paid by the existing operators for their 3G spectrum. There was no detailed information in the government’s press release on what the value could be for the 5MHz spectrum reserved for a new entrant," Grivolas says.
Grivolas adds that is likely that if the candidate has to pay a third of €619 million then the situation may lead to complaints from potential new entrants.
"At the same time, if the price is far below this amount then existing operators – Orange, SFR and Bouygues Telecom - may complain. Another significant aspect that has not been mentioned in the statement is the fact that GSM spectrum was formerly supposed to be allocated to the new 3G entrant. Is this still the case? The uncertainty surrounding the potential re-allocation of 900MHz to a new entrant has been one of the barriers to UMTS900 rollout", says Grivolas.
Commenting on whether 5MHz spectrum enough to sustain an aggressive marketing strategy, Grivolas says that with 5MHz lot being reserved for a new entrant, the French government gave a clear sign that it wants to encourage competition by persuading a new player to shake up the current French mobile market.
"However, at the same time, the fact that only 5MHz spectrum has been reserved for the new entrant looks like a limiting factor.
One of the most obvious candidates for the spectrum is Free. The alternative operator’s strategy has always been to offer fixed broadband services that combine low pricing with adoption of the latest technologies. Free has already announced that if it were selected to become the fourth mobile operator in France it would adopt a very aggressive pricing strategy," contends Grivolas.
He estimates that a French family composed of two adults and a child spends around €2,000 a year in mobile subscriptions. Its goal is to halve this amount.
"If Free duplicates its fixed broadband strategy to mobile, and if the services are well received by the population, then the 5MHz spectrum may generate capacity limitations at some point. It is important to note that each of the existing operators owns 15MHz FDD and 5MHz TDD spectrum. With two additional 5MHz lots to be auctioned, they are well-placed to further strengthen their spectrum position.
Overall, we believe the existing operators will not be too upset by the French government’s decision, while potential new entrants may consider the possibility of entering the mobile market for a lower spectrum fee than initially expected", Grivolas concludes.