France awards just two UMTS licenses

The French telecommunications regulator Autorité de Régulation des Télécommunications (ART) recommended to the French government on Thursday that it issue licenses to operate 3G (third-generation) mobile telecommunications networks to France Télécom SA's mobile telecommunications subsidiary, Orange SA, and Vivendi Universal SA's subsidiary SFR.

"We have here two applicants of high quality. The two applicants made promises of network coverage in excess of the minimum requirement for a license," said Jean-Michel Hubert, president of ART, congratulating the companies on the quality of their license applications.

The two winners already operate GSM (Global System for Mobile communications) networks in France. The new licenses will enable them to deliver mobile multimedia services to their customers over as-yet unbuilt networks based on UMTS (Universal Mobile Telecommunications System) networks.

ART announced a beauty contest last year for four licenses to operate UMTS networks. Instead of auctioning the licenses -- a procedure which netted the U.K. and German governments around US$81 billion last year -- the French government asked licensees to submit an application outlining their business plans and the benefits they would offer French consumers.

The winning applicants were told they would pay a fixed fee of 32.5 billion francs (US$4.8 billion) for a 15-year license to operate their network. However, by the deadline in January, only two applications were received, from Orange and SFR. Two other potential bidders, Suez Lyonnaise and Bouygues Telecom (operator of France's third GSM network), pulled out at the last minute, saying that the price was too high.

The award of the other two licenses will still go ahead, said Hubert. New applications will be invited during the first half of 2002, leaving applicants time to build their networks before the end of 2003, when the market for 3G services is expected to take off, he said.

Sharing of network infrastructure such as transmitter sites will be permitted, he said, but such sharing must not be allowed to interfere with operators' ability to operate their sites independently and to compete freely with one another, said Hubert.

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