France sets €2.5B reserve price for 700 MHz auction

France plans to sell frequencies in the 700-MHz band to the country's mobile operators by the end of 2015, and has set the total reserve price for the spectrum at almost €2.5 billion ($2.8 billion).

According to statements published on Friday by the French Ministry for the Economy and Finance and regulator Arcep, a minimum price of €416 million has been set for each of the six 2×5 MHz blocks of spectrum, which is currently used by television broadcasters.

The reserve price is in line with the €2.6 billion raised from the auction of 800-MHz frequencies in 2012 and was described by Minister for the Economy, Emmanuel Macron, as "fair".

However, analysts from Jefferies International noted that the reserve price is much higher than the €1.5 billion set in Germany for the auction of several spectrum bands. "The government's desire for proceeds has been safeguarded by setting a high reserve price," the analysts noted.

According to the draft conditions of the auction outlined by Arcep, which is responsible for the overall process, caps will also be placed on the total amount of mobile spectrum that each operator can hold. Despite some suggestions that this might benefit Iliad's Free Mobile as its holds fewer frequencies than competitors Orange, Bouygues Telecom and Numericable-SFR, Jefferies analysts noted that there is no favourable treatment for Iliad.

"In a scenario where Bouygues Telecom was not bidding aggressively, Iliad might pick up two blocks cheaply, since the auction will automatically stop when six bidders remain on the six available blocks," the analysts said. However, they believe that Orange, Bouygues Telecom and Numericable-SFR are all likely to "bid fairly aggressively to make life uncomfortable for Iliad."

The conditions stipulate that a single candidate cannot acquire more than three blocks (that is, 2×15 MHz) in the 700 MHz band, and will not be able to exceed a limit of 2×30 MHz of the 700 MHz, 800 MHz and 900 MHz bands combined. Arcep has now submitted its proposals to the Electronic Communications Advisory Committee (CCCE, Commission Consultative des Communications Electroniques).

In Germany, the frequency auction ended on Friday with total bids exceeding €5 billion--well in excess of the reserve price of €1.5 billion. However, here 270 MHz of spectrum from the 700 MHz, 900 MHz, 1500 MHz and 1800 MHz bands was auctioned.

Candidates for the French auction will have until the end of the third quarter to file their applications. Arcep plans to conduct the auction in the fourth quarter of the year, and to award the licences to the winning candidates before the end of 2015.

The French government decided last year to free up the 700 MHz band and to allocate 2×30 MHz of spectrum to mobile operators. Arcep noted that the band would be freed up progressively across the country between April 2016 and June 2019.

For more:
- see this Arcep release
- see this statement from the French Ministry for the Economy and Finance

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