French government cuts UMTS licence fees

The French government has cut the licence fee it will charge French mobile network operators to operate Universal Mobile...

The French government has cut the licence fee it will charge French mobile network operators to operate Universal Mobile Telecommunications System (UMTS) networks in an effort.

When Société Française du Radiotéléphone (SFR) and Orange won their 15-year licences in May, they expected to pay 4.95bn euros (£3bn) each for the privilege of operating a 3G communications network.

Now Orange, a subsidiary of France Télécom, and SFR, majority-owned by Vivendi, must each pay an "entrance fee" of just 619m euros (£390m), around one-eighth of the original fee, plus a percentage of their revenue from operating the networks. In addition, the licences will be extended to 20 years, to take account of the delays in bringing the services to market.

The same payment conditions will be applied to the two remaining 3G licences. The entrance fee for these licences will be payable in 2002.

The French government estimated that the amount received by the treasury over the lifetime of the licences would be close to what was originally expected, but the deferred payment structure would better suit the network operators.

France Télécom welcomed the news, saying that it had always found it unreasonable that profits be taxed before they had been made.

Last year, the Autorité de Régulation des Télécommunications (ART), the French telecommunication regulator, chose not to auction the licences but to award them to prospective licensees according to their business plans.

Nine similar licences auctioned in the UK and Germany last year raised a total of around $81bn (£56.2bn) for those countries' treasuries.

France Télécom said that other European governments could learn from the French decision to cut the fees and defer payment. The company called on the European Union to examine the vast differences between licence conditions for 3G network operators in the 15 member states.

While the licence fees set by ART in 2000 were considerably lower than those reached at auction in the UK and Germany, they looked expensive by the time the application deadline passed in January, as licence auctions had by then collapsed in a number of other European countries. Two potential bidders, Suez and Bouygues Telecom (operator of France's third GSM network) chose not to apply for the French licences, saying that the fees were too high.

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