(Updates with comments from government and company spokespeople)
PARIS -(Dow Jones)- The French Senate Tuesday adopted an amendment to the country's budget bill for 2008 that allows the government to change the financial conditions for assigning France's fourth mobile-phone license.
A first round of bidding collapsed over the license fee.
The amendment allows the government to set the financial terms of the license by decree, preparing the ground for a new bidding process as the government seeks to introduce more competition into the mobile-phone market to benefit consumers.
"It's absolutely necessary that there is a fourth operator," Pierre Herisson, the senator who proposed the amendment and a member of President Nicolas Sarkozy's ruling UMP party, told Dow Jones Newswires.
The amendment was adopted with the support of the government and the Senate finance commission, a spokeswoman for the Senate said.
In October, French telecommunications regulator Arcep rejected the sole bid for the license from internet provider Iliad, because it failed to meet the required financial conditions. Following the collapse of the process, Finance Minister Christine Lagarde said all options remained open for the future attribution of the country's fourth and last third-generation, or 3G, license.
A spokesperson for the French Finance Ministry told Dow Jones Newswires Tuesday that "approving the amendment was a way of keeping the options open on this license. No decision has yet been taken on the substance of the matter, but it will be soon, probably at the end of 2007 or the beginning of 2008."
Iliad, which wanted a reduction or staggering of the EUR619 million license fee, has said it remains interested in obtaining the license and a renewed bidding process could attract the attention of other operators such as Neuf Cegetel, which has said it would consider bidding.
It would also draw ire from the country's three established mobile network operators, who control 96% of the mobile-phone market. The three largest operators, in descending order of market share, are France Telecom's Orange; SFR, co-owned by Vivendi and Vodafone Group; and Bouygues Telecom, a subsidiary of Bouygues.
Spokespeople for Orange and Bouygues declined to comment Tuesday while SFR wasn't available for comment, but the three companies have previously said that the terms of the license should remain the same as those that applied when they bid for their licenses.
If the government lowers or staggers the license payment, as now appears likely, the three established operators could try to block the process through lobbying or legal action, either in France or though the European Union.
Still, they may not find a sympathetic ear in Brussels. In December 2006, the European Commission said it saw no problems with Vodafone's Czech subsidiary obtaining a 3G mobile license at a significantly reduced price, despite complaints from Telefonica's Eurotel and Deutsche Telekom's T-Mobile.
Sarkozy made improving consumers' purchasing power a central plank of his presidential campaign and his spokespeople have cited mobile-phone services as an area where prices could be driven lower.
"We want the government to have the means to improve purchasing power," Senator Herisson told Dow Jones Newswires, referring to the amendment to the budget bill.
Analysts note that a new entrant would face a stern challenge in putting together a new 3G network, but increase competition for the three existing operators.
The new network operator would face "multiple obstacles" in building its 3G network, according to analysts at Cheuvreux, including costs of about EUR500 million, difficulty finding sites for masts, as well as putting together a distribution network.
Investor concerns over Iliad's eagerness to bid for the license and heave capital expenditure into a new network have weighed on its share price.
The company's shares are up about 4% so far this year, outperforming a 3% fall in France's SBF-120 index, but significantly underperforming a 32% rise in rival Neuf Cegetel's stock. Iliad stock closed Tuesday down EUR0.30, or 0.44%, at EUR68.35 in an overall lower market.
Meanwhile, Credit Suisse analyst David George said in a note to investors Monday that a new entrant would lower medium term earnings-per-share forecasts for France Telecom by 6%-7%.
-By Jethro Mullen and Olivier Hensgen, Dow Jones Newswires; 33-1-4017-1738; jethro.mullen@dowjones.com
(END) Dow Jones Newswires
Posted to the site on 27th November 2007
Posted to: www.cellular-news.com/story/27711.php