At least in the short term, the recently-concluded French auction of 700-MHz frequencies for mobile communications “is unlikely to have an immediate impact on the competitive dynamics in the market,” according to Fitch Ratings.
On one hand, Illiad, the attacker in the French market, gained as much new spectrum as did Orange, the market leader. If some had hoped Illiad would not gain any new spectrum, Illiad wins.
On the other hand, Illiad still has less lower-frequency spectrum than Orange and the other carriers.
Over the medium-to long-term, operators with higher amounts of spectrum below 1GHz could gain a network cost and flexibility advantage as capacity requirements for LTE data grow, according to Fitch.
That includes Orange, with 31 percent of total sub-1 GHz spectrum, followed by Bouygues Telecom and Numericable-SFR, each with 28 percent of the below-1 GHz spectrum.
Iliad (Free Mobile) gas 13 percent of the below-1 GHz spectrum.
In the near-term Fitch expects existing competitive trends to persist as challenger Iliad SA continues to gain scale in mobile and strengthen its quad-play proposition.
Orange's stronger spectrum holding will provide the company with greater flexibility in deploying its network and meeting capacity demand for growth, according to Fitch.
Orange and Iliad secured two blocks of 5 MHz duplex each, while Bouygues Telecom and Numericable-SFR secured one block each.
The total cost of the spectrum of EUR2.8 billion is slightly above the reserve price of EUR2.5 billion.
The auction was of particular importance to Iliad due to its lack of holding in the 800MHz band and 2x5MHz holding in the 900MHz band. As Illiad gained as much spectrum as did Orange, the auction arguably helps Illiad more than the other contestants.
Still, argues Fitch Ratings, Orange's substantial network investments secure the incumbent's operational prospects in the medium term, with a clear network advantage versus its competitors.
At the end of 2014, Orange's and Bouygues' networks covered just above 70 percent of the French population, ahead of Numericable-SFR's and Iliad's that only reached 53 percent and 33 percent respectively.
The auction raised a total of €2.796 billion, or an average of €466 million per block, ahead of the minimum price of €416 million per block set by the regulator Arcep.
The amount was similar to the French and European norm for 800 MHz 4G spectrum, auctioned in France in 2011.
The French government will be receiving fees 12 percent above the reserve, though this is far less of a windfall than Germany experienced when it held Europe's first auction in the 700 MHz band, back in August, 2015.
That sale (which also included 900 MHz and 1.8 GHz blocks) raised a total of €5.08 billion, 3.4 times the reserve of €1.5 billion. The three German winners gained equal amounts of 700 MHz spectrum.
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