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France Arcep Awards Xavier Niel Fourth 3G License to Iliad group’s Free Mobile- France Telecom, Vivendi and Bouygues may face a price war

By Elizabeth Haggar for CEOWORLD Magazine Updated:December 18, 2009

French broadband services provider Free Mobile, a wholly-owned subsidiary of the Iliad group (ILD, News, Press Releases: 0.00 N/A N/A, yield: N/A, cap: N/A, 1yr target: 0.00) today received the thumbs up from the telecoms regulator Arcep (Autorite de Regulation des Communications Electroniques et des) to become the country’s fourth mobile network operator, in a move that is set to shake up the telecoms market.

France Telecom SA (FTE, News, Press Releases: 23.93 -0.17 -0.71%, yield: 8.17, cap: 63.467B, 1yr target: 31.65), Vivendi SA (VIV, News, Press Releases: 27.24 -0.45 -1.63%, yield: 4.66, cap: 10.885B, 1yr target: 34.35) and Bouygues SA (BOUYY, News, Press Releases: 0.00 N/A N/A, yield: N/A, cap: N/A, 1yr target: 0.00) may face a price war in one of their fastest-growing businesses after Xavier Niel’s Iliad SA enters the French mobile-phone market.

After Iliad moved into the broadband Internet market with its “Free” service, it helped drag down prices as much as 37 percent. France is one of Europe’s most expensive mobile markets. If Iliad founder Niel, a former sex-shop chain owner, brings his discount model to the segment, prices will slide.

In a statement, the watchdog said it will officially award the spectrum in January 2010, while the ISP has apparently committed to launching services under the Free Mobile brand within two years.

The newcomer has pledged to cover at least 90% of the population with its 3G network within eight years of launch, and its promise to deliver ‘competitive prices’ should spur growth in the mobile internet access segment. Free Mobile has also committed to hosting mobile virtual network operators (MVNOs), Arcep added.

Industry watchers are in broad agreement that Iliad could realistically garner a roughly 5% share of the EUR25 billion (USD36 billion) French mobile market by 2015. The operator has a strong fixed line presence and comprehensive broadband portfolio, and has been actively trying to secure a toehold in the mobile market since it failed in its first application attempt in 2007.

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