6
Dez
2005

Carriers French mobile operators fined a massive €534m

From Phil Watts

Carriers French mobile operators fined a massive €534m
by Guy Daniels - 1/12/2005 12:23:42

It has been a bad morning for France's mobile operators. Earlier today, they received the news that the country's competition authority (Conseil de la Concurrence) has decided to fine Orange, SFR and Bouygues Telecom a record amount of €534 million for market collusion practices between 1997 and 2003. France Telecom's Orange takes the brunt of the fines, with €256 million, whilst SFR is fined €220 million and Bouygues Telecom a more modest €58 million.

The competition authority says the French operators engaged in two illegal practices: they exchanged confidential information - about the number of new clients and the number of cancellations - during the period; and they agreed between themselves the market share for each party during 2000 and 2002. The Conseil de la Concurrence considers that these practices have damaged the economy and altered the intensity of the competition between the operators.

France Telecom has already announced it is going to appeal against this decision, which it says is "based on events that are now long past" and which "has been handed down despite months of actions of all kinds seeking to discredit the telecommunications sector in France".

It says that the ruling could have a serious impact on public confidence in one of the most dynamic sectors of the country's economy, one which has invested more than €60 billion over ten years and employees some 250,000 people.

"This ruling is based on the existence of an exchange of information among the three mobile operators, and on allegedly concerted practises that led to a freeze in market share between 2000 and 2002,"says the official France Telecom response. "The idea that it would be possible to control a market of roughly 40 million customers sourcing their products from 20,000 points of sale, is totally unrealistic. During the period in question, 20 per cent of customers changed operators each year on average. In addition, half of the points of sale distributing mobile products and services do not belong to operators, but are independent distributors or part of leading retail groups, constantly putting the offerings of the different mobile operators into competition with one another."

Orange France adds that during the 1997 and 2003 period, customers benefited from roughly 20 per cent decrease in mobile telephony prices. Needless to say, it will appeal the decision.

"This is really bad news for the French operators, for two reasons," said Vincent Poulbere, Senior Consultant with Ovum. "First, because of the record amount of the fine (from 14.6-18.3 per cent of the operators' net profit in 2004); and second, because of the bad press resulting from this decision and the damage it will do to the operators' brands and credibility."

Ovum said they were surprised by the competition authority's findings (published on its website) about how operators exchanged confidential information and agreed on market shares. However, they also note that this isn't the end of the story. Not only will the decision will be appealed by the operators, but the customer association UFC Que Choisir - which lodged the original complaint - plans to launch a US-style class action suit against the operators.
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