Iliad Loses 3G War in France

Iliad Loses 3G War in France

France's Iliad has lost its epic quest to be the fourth 3G mobile operator in France after a lack of financing proved to be its Achilles' heel. The news was well-received by France Telecom, Vivendi and Bouygues, which will be spared a new competitor.

According to France's communications regulator, telecommunications company Iliad's Free Mobile subsidiary does not have the necessary financial clout to afford a 3G license, which currently costs 619 million euros ($876.8 million). The regulator said that Free's share capital amounted to 40,000 euros ($56,700).

Investors reacted positively to the news on Wednesday, with the price-tag of a license perhaps too steep just for the chance to compete with big players such as France Telecom's Orange and Vivendi's SFR.

Shares in Iliad jumped 2.02 euros ($2.86), or 2.8%, to 73.51 euros ($104.13) during afternoon trading in Paris. The owners of France's three 3G licenses also gained from the lack of a new competitor: shares in France Telecom increased 18 eurocents (25 cents), or 0.8%, to 23.32 euros ($33.03). Vivendi rose 63 eurocents (89 cents), or 2.1%, to 30.64 euros ($43.40), while Bouygues lifted 1.02 euros ($1.44), or 1.6%, to 63.42 euros ($89.82).

"The French market continues to be characterized by its lack of competition, one of the lowest penetration rates in Europe and tariffs amongst the least attractive for mobile users," said Iliad on Wednesday.

It is a similar story across much of Europe, which has seen 3G license fees reach exorbitant levels because of limited bandwidth allocation for the high-speed data transmission. With national regulators having the final say, fierce competition between operators over a limited slice of spectrum led to high prices and equally high losses for 3G investments.

French finance minister Christine Lagarde said she had "noted" the rejection of Iliad's application, adding that all options were open for the fourth license.

Even major players have been squeezed out of mature, low-growth European markets. France Telecom quit the Dutch mobile market last month when it sold its Orange Netherlands subsidiary to Deutsche Telekom for $1.8 billion, focusing instead on acquisitions in Asia and Africa.