France slashes UMTS price
Reuters - 30 November 2001
France confirmed on Friday it was slashing the price of high-speed mobile phone licences to encourage debt-laden telecoms operators to bid for airwaves after the first sale of licences flopped.
The finance ministry reaffirmed successful operators would have pay a flat fee of 619 million euros to get a licence and set a new variable charge amounting to one percent of revenues to be made from the next generation of fast-access mobiles.
The so-called UMTS tax is at the low end of a one to two percent range floated in recent weeks, and coupled with the reduced flat fee it is likely to mark a major price cut from the five billion euros originally charged in round one.
France softened the terms after just two operators - France Telecom and Vivendi's SFR network - took part in the first sell-off of UMTS licences last year, when global telecoms markets were in a far healthier state.
The new terms will apply retroactively to those licences and the government said it hoped they would ensure the success of the whole UMTS licensing process, which has caused Europe's telecoms industry to wobble under billions of dollars in debts.
"From an operational point of view, one percent is better than two percent," Vivendi Universal chairman Jean-Marie Messier, who had campaigned for a price cut, told reporters.
"This decision confirms the courageous stance that was adopted a few weeks ago," he added.
Utility Suez and construction firm Bouygues both dropped out of the first round of bidding for four French UMTS licences last year, citing steep fees in the face of technological uncertainties.
France gave way with a lower flat fee in October and also lengthened the validity of the licences to 20 from 15 years.
The move is expected to leave a hole in government coffers in the short term. UMTS fees were originally earmarked to top up state pension funds.
Sources close to the talks disclosed the likelihood of a one-percent UMTS tax to Reuters earlier this week.
"It's a good decision as it is at the low end of the range and will allow us to develop third-generation more quickly," France Telecom spokesman Bruno Janet told a conference call, reacting to the government's decision on Friday.
Bouygues declined to comment on the new terms before receiving full details of how the sell-off will be organised, but industry sources say France's third largest mobile network is unlikely to want to be left out of the race this time.
The beauty-parade style of auction is now expected to go ahead around the end of the year.
The government also announced plans to extend the existing GSM mobile network in a move that would cost France Telecom's Orange and SFR 500 million francs each over two years.
It said more of the cost of extending the mobile phone network to France's remoter areas would have to be picked up by private firms, who have tended to turn to the state for help.
The cost of ensuring full coverage across France is greater, in proportion to the population, than other parts of Europe because of its rural geography and lower urban density. |
