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Last month, Arcep, the French regulator, began another public consultation into the sale of the country’s fourth WCDMA license. The regulator failed to find a suitable bidder when it put the license up for sale last year and is now proposing several new ways to award the license, including breaking up the spectrum into several ‘lots’ with some reserved for new entrants. France is hoping the new license will stimulate competition and spur growth in WCDMA services amid growing concern that it is falling behind other major Western European markets.
 
France is currently the smallest WCDMA market among the ‘big five’ Western European countries (UK, France, Germany, Italy and Spain), registering just 8.4 million (combined WCDMA and WCDMA-HSPA) connections at the end of last year. This figure represented less than 20% of total mobile connections at the time. By contrast, Italy and the UK are the most advanced WCDMA markets, numbering 24 million (27% of total) and 16.5 million (22%) connections, respectively. In these markets, we see WCDMA taking significant growth out of GSM connections. Our forecasts show that France will continue to lag behind the market until at least 2010. By the end of that year, we expect France to have 29.7 million WCDMA connections; according to our forecasts Italy could surpass this figure during the current quarter (Q2:2008).

All three French networks – Orange, SFR and Bouygues – have begun upgrading their WCDMA networks to WCDMA-HSPA, but France trails here too. By end of first-quarter 2008, France had 319,091 WCDMA-HSPA connections, trailing Italy (1.6 million), Germany (683,700), the UK (593,596) and Spain (476,586). We forecast that by year-end France will be the only one of the big five Western European markets not to register 1 million or more WCDMA-HSPA connections.
 
Faced with the prospect of falling behind neighbouring markets, it is unsurprising that France is looking for a new WCDMA entrant (or possibly multiple entrants) to compete with the current networks. In markets with four or five major networks, rolling-out high-speed services is often a key differentiator; the three French operators, meanwhile, maintain comfortable market shares (sometimes not always within the rules – in 2005 they were found guilty of collusion and market distortion).
 
But the problem is not simply about lack of competition. Poor WCDMA network coverage has been a major disincentive for subscribers to migrate to high-speed services. Orange, for example, claims to have 99 percent EDGE network coverage in France but its WCDMA coverage is still limited to the major metropolitan areas. Under the terms of its license, Orange is committed to achieving 70 percent WCDMA population coverage by the end of the year. By contrast, UK operators had to meet a deadline of at least 80 percent coverage by the end of 2007.
 
France faces an arguably greater challenge in changing the mindset of its mobile consumers, who have historically been more motivated by value-for-money and reliability than high-speed services and top-of-the-range handsets. The situation is not helped by a wide range of different tariffs, offers and contract lengths available that can often make it difficult for a suitable high-speed data package to be identified.

However, this does not mean that demand for high-speed services does not exist. France’s fixed-line broadband market – in which both France Telecom/Orange and SFR (via its recent acquisition of Neuf Cegetel) are strong players – is one of the most advanced in Europe. Arcep will be hoping that the new market entrants, which are likely to be specialist WCDMA operators, will kick-start a similar market opportunity in mobile.

Joss Gillet, Senior Analyst, Wireless Intelligence

Data usage is not a fairy tale; it is happening in most markets where operators have successfully launched high-speed services. Among the key success factors are: easy-to-understand offers, affordable handsets, national coverage and unlimited data plans. It is hard to avoid the conclusion that French operators seem to have taken a less proactive approach towards high-speed services than other operators in neighbouring markets. All three operators are offering a dozen packages each, from prepay to contract, plus special offers and promotions. This lack of clarity does little to help subscribers migrate to data orientated packages. On top of this, an operator such as Orange France is offering eight different unlimited data plans, creating even more confusion. High-speed services are still branded ‘3G’ or ‘3G+’ in most cases, which has proven to be a marketing mistake in the past and is still confusing consumers today. Is ‘3G+’ a service or a technology? And most fundamentally network coverage remains poor, and mainly limited to the metropolitan areas. Outside of the WCDMA coverage areas users will run on EDGE, which is slowing down the promised user experience.