French 4G Auction Results Announced

French 4G Auction: Orange, SFR and Bouygues Telecom each obtain 2x10 MHz of coveted digital dividend spectrum in the 800 MHz band. French state to receive €3.6 billion. License terms to include full MVNO access. Spectrum sharing allowed.

ARCEP yesterday announced the results for its 800 MHz auction.  Orange, SFR and Bouygues Telecom each obtain 2x10 MHz of coveted digital dividend spectrum in the 800 MHz band. The French state will receive €2.639 billion.  The auction procedure was a sealed bid combinatorial auction. In addition to a purely financial criterion, each operator's offer was increased by a multiplier if the candidate proposed to host full MVNOs on its network, and if the candidate proposed an enhanced rural build-out obligation compared to the baseline obligation imposed by the ARCEP. 

Each of the three winning candidates (Orange, SFR and Bouygues Telecom) made financial bids of between €683 million and €1,065 million, and each proposed enhanced obligations in terms of MVNO hosting and rural build-out.  Free Mobile's bid was unsuccessful. However because Free Mobile successfully obtained spectrum in the 2.6 GHz band in the recent French 2.6 GHz auction, and because Free Mobile participated in the 800 MHz auction but did not win any spectrum, Free Mobile will benefit from national roaming on the network of one of the winning bidders in the 800 MHz auction. The operator required to host Free on a national roaming basis is SFR, the bidder who obtained more than one spectrum block in the 800 MHz auction. SFR bid for and obtained two contiguous 2x5 MHz blocks in the middle of the 800MHz band, and is therefore obligated to host Free Mobile in the context of national roaming.  Free Mobile can only benefit from national roaming from such time as it has built out its own 2.6 GHz network to cover at least 25% of the French population. Moreover, the national roaming that SFR must offer is not really "national." It only covers rural areas where it would not make economic sense to deploy a 2.6 GHz network. 

In the recent 2.6 GHz auction, each of Free Mobile, Orange, SFR and Bouygues Telecom obtained between 2x15 and 2x20 MHz. Each of the four operators will likely deploy LTE networks based on 2.6 GHz in urban areas and 800 MHz in rural and urban areas. Not having its own 800 MHz spectrum, Free Mobile will have to rely on the 800 MHz spectrum of another operator. Because each of the successful 800MHz bidders agreed to host full-MVNOs on their network, Free Mobile could not only ask for national roaming from SFR as provided in SFR's 800 MHz license, but could request MVNO access from any one of the three successful candidates. 

Because each operator accepted enhanced MVNO access obligations, each operator must respect a number of MVNO conditions, including a prohibition of certain blacklist clauses listed in the ARCEP's 800 MHz license terms. On the key issue of pricing of MVNO access, the 800 MHz license terms are relatively vague: the host network must offer access on "economically reasonable conditions." 

The 800 MHz license terms permit spectrum sharing between operators, and even impose spectrum sharing in certain rural areas. Operators will therefore be able to put together 2x20 MHz channels for LTE on the basis of voluntary agreements.

One of the key take-aways from France's 4G auction is that the ARCEP may finally have succeeded in imposing full MVNO access obligations on all French mobile operators, which is an objective that ARCEP tried unsuccessfully to achieve in 2005 based on classic market analysis and SMP procedures.

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