Bouygues Telecom Loses 3G License Appeal

The European Court of Justice has ruled that the French government was correct in retrospectively lowering the 3G license fees it charged to France Telecom and Vivendi's SFR. In 2000, the French government sold two 3G licenses to France Telecom and SFR for EUR4.95 billion each. A later attempt in 2002 to sell the remaining two licenses raised just EUR619 million from Bouygues Telecom. The fourth license remains unsold to this day.

The government later decided to change the original 3G licenses so as to make them identical to the provisions applied to Bouygues Telecom (20 years instead of 15 years and a financial reduction from EUR 4.95 billion to EUR 619 million plus a percentage of turnover).

Bouygues  sued to try and have this reduction classed as illegal state aid.

Bouygues initially sought to overturn that decision at the Court of First Instance in Luxembourg, but lost the action in 2007. Following an appeal, the European Court of Justice issued its ruling last Friday declaring that the reductions in the license fees did "not constitute state aid,"

The court noted that the French government was obligated by EU law to award 3G licenses by the end of 2000, and that the seeming failure to sell all four licenses did not allow sufficient time to re-run the auction process. As the government was able to later sell an additional license, the revaluing of the original licenses to match the later license was "inevitable, given the general scheme of the system of Community telecommunications law."

The Court did note in its ruling that although a 3G licence has an economic value, that value depends on the time when each of the operators concerned entered the market. As the Court of First Instance held, as of 3 December 2002, the date on which the licence was awarded to Bouygues Telecom, Orange and SFR had not yet been able to launch their 3G services, hence to make use of their licences, for reasons beyond their control, namely, problems related to the 3G technology and an economic context unfavourable to its development.

Consequently, the Court ruled that the economic value of the licences granted to Orange and SFR could not, by dint merely of being awarded earlier, be higher than that of the licence awarded to Bouygues Télécom.

Posted to the site on 5th April 2009