France to Award Radio Licenses for Local Telephone Service
By Daniel Tilles
quote.bloomberg.com
Paris, July 10 (Bloomberg) -- Siris SA, FirstMark Communications Europe SA and 26 other phone companies await a French government decision this week on the awarding of 54 radio phone licenses, a key step in opening the local telephone market to competition.
The French phone regulator will give two national and 52 regional licenses for so-called local radio loop technology, a wireless link connecting a fixed transmission site with end users. The bidders are vying for a slice of the local market -- worth 57 billion francs ($8.3 billion) last year -- that has been the unrivaled domain of former monopoly France Telecom SA.
Some phone companies are bidding alone while others have teamed up with firms specializing in retailing or banking. All are targeting small- and medium-sized businesses, schools and hospitals that want fast access to data, voice, even movies over the Internet.
``The local market is hugely profitable and competitors want part of it,'' said Eric Burkel, an analyst with Global Equities. ``Today they have to pay France Telecom network access charges, which can represent a significant amount of their profits.''
While voice traffic is declining about 5 percent annually, data transmission -- notably Web use -- will double this year to 4 billion francs, the Autorite de Regulation des Telecommunications, the French telephone regulator, said.
Having an alternative to France Telecom's local connection should benefit customers. Some phone company executives say that local radio loop technology will enable them to cut customer phone bills by as much as 35 percent.
France will award the licenses by July 14 at the latest, Jean- Michel Hubert, the head of ART said last month.
Not France Telecom
There are eight candidates for the two national licenses, including Siris, which is owned by Deutsche Telekom AG, Cegetel SA, Winstar Communications Inc., 9 Telecom Reseau SAS and FirstMark, which in France has stakes held by companies including Suez Lyonnaise des Eaux SA, BNP Paribas SA, Groupe Arnault, Rallye- Casino Group and Rothschild & Cie.
For its part, an application by France Telecom -- which has seen more than 90 competitors chip away at its domestic business since the market was first opened to competition in 1998 -- was rejected earlier this year by the phone regulator. The state- controlled company missed the deadline for submissions by two minutes, ART said.
Building a local wireless radio system will not come cheap.
The investment required to construct a national network, which includes the use of two frequency bands, may surpass 800 million euros ($759 million), said Thierry Mileo, managing director for FirstMark France.
Siris Chief Executive Olivier Campenon said his company -- France's third-biggest phone operator -- has budgeted 3 billion francs over the next four years for transmission equipment and network development.
``This is for the top 100 urban centers in France,'' he said. ``Our forecast three-year return on investment depends on capturing about 15 percent of local market traffic.''
One Failure
At least one earlier attempt to introduce the technology failed. In 1998, the U.K.'s Ionica Plc, a wireless telephone company started two years earlier, went broke as it failed to win enough customers to help pay for a wireless system.
``The technology wasn't proven at that point in time,'' said Burkel. ``It took longer than expected to get the kinks out of the system.''
While 9 Telecom, Cegetel and another applicant called Tele 2 BLR are going all-or-nothing with national bids, Siris and FirstMark have taken a more conservative approach, applying as well for 22 regional permits (eight of the 52 regional licenses are overseas French ``departments'' including Guadalupe and Martinique), that offer national coverage though with narrower bandwidth.
``Our preference is national,'' Mileo said. ``If we received all the regionals we'd have the equivalent of about 90 percent of the power of a national license.''
France is not the first European country to award these wireless licenses.
Other Countries
On March 10, the Spanish government handed out six to different groups including one comprising Jazztel Plc, Teligent Inc. and Abengoa SA and another whose shareholders are RSL Communications Ltd., United Pan-Europe Communications NV, Grupo Dragados SA and Spanish electrical utility company Hidrocantabrico.
Closely held FirstMark was part of another winning a permit.
Germany, Finland, Ireland and Norway have also made their selections, while the U.K., the Netherlands, Denmark and Belgium are in the midst of, or are about to start, the process.
Cegetel, which is controlled by French media and utility company Vivendi SA, may bid for some of these permits outside France, Chief Executive Philippe Germond said recently at a telecommunications conference in Paris.
``You must have a multipronged approach to getting into the local business market,'' said Stefan Sater, an analyst with SG Securities. ``It's a major lift to have a license.''
The real winners may be the phone-equipment makers such as Ericsson AB and Alcatel SA, Europe's first- and second-biggest, respectively.
Campenon said both will supply Siris with gear needed to build the network, while FirstMark's Mileo said Alcatel will be the main equipment supplier in France.
``As a general rule, 50 percent of the investment is for the network and equipment,'' Mileo said.
U.K. Bidder
Local loop technology works best at a distance of less than 5 kilometers, although Mileo said it can extend as far as 12. At longer stretches, however, the signal quality may be affected by weather conditions, he said.
In the U.K., Energis Plc, Britain's largest carrier of Internet traffic, has said it will bid for a permit.
Companies bidding for regional wireless local licenses in France include units of Belgacom SA, CompleTel Europe NV, Kast Telecom Inc. and Formus Communications Inc.
Radio technology is already in use in the U.S. and companies such as Teligent provide telephone and data services on wireless links. |
