French desperate to sell 3G licences

The French government is nearing desperation after its crushing failure to sell third-generation licences to mobile phone operators.

The French government is nearing desperation after its crushing failure to sell third-generation licences to mobile phone operators. With just a few weeks left to the final deadline, two of the four available slots have not received any bidders.

As a last-ditch effort to get companies to make a bid, the French authorities have slashed the price of the licences. But even the price of €617m (£385m) has not so far done the trick.

City analysts believe it's a significant sign of the times. While mobile companies during the bubble era were prepared to run up crippling debts to win the licences, operators have now adopted a more realistic view of the value of the technology.

"This is a very different market now," explained one Crédit Lyonnais analyst. "You used to have huge availability of financing – that is gone. And there were some unrealistic opinions on the value of these things – those are gone."

Two years ago, the five licenses available in the UK received a host of eager bidders, and the licences were eventually sold for £22.5bn.

It was a similar story a few months later in Germany, when the average cost of a licence rose at auction to over €6bn (£3.75bn).

Although the French mobile phone market has grown swiftly over the past three years, the licences to develop third-generation services are not especially attractive to outside bidders as France is now seen as a closed market.

Orange – which is in effect the mobile arm of France Telecom – will be going for one of the licences, and SFR – a consortium led by Vivendi and Vodafone – will go for the other.