French mobile operator SFR, majority-owned by Vivendi, has withheld payment for its 3G license.
French mobile operator SFR, majority owned by media group Vivendi Universal, has said that it will withhold payments to the French government for its 3G mobile license. The company has placed the first E619 million payment (out of a total E4.95 billion) into a blocked bank account. SFR says it wants to open a constructive dialog over renegotiating the license’s terms.
While SFR is technically in breach of its license terms, it is extremely unlikely that the government will take the license back. Out of four 3G licenses the French government made available this year, it only had two takers – existing GSM mobile operators SFR and France Telecom/Orange. Various other bidders, including third mobile operator Bouygues Telecom, dropped out as telecoms stocks plunged. The last thing France needs is to lose yet another operator.
So what will happen? While the 3G license fees charged in France are lower than in the UK or Germany, the government has insisted a large proportion of the license be paid for upfront. A total of E1.24 billion is due from each operator this year, with another E1.24 billion due for 2002. Since operators are not expected to break even on 3G for many years, this is a major burden for them.
As a result, it is quite likely that the French government will revise the payment schedule, even though it will hit the national budget. Telecoms regulator ART has already asked the government to cut payments in the early years to encourage bidders for the other two licenses; this move will add weight to these recommendations. This would be good news for SFR and Orange, as well as potentially benefiting Bouygues.
The move may also have another effect. SFR’s 20% shareholder Vodafone has long been seen as a potential bidder for the unit, while many question Vivendi’s long-term commitment to telecoms. If Vivendi is unwilling to stump up the cash for SFR’s license, then Vodafone’s still significant cash-pile could come into play.
