5G spectrum auction: France started late, finished fast

News

The auction concluded in three days with the country’s biggest mobile operator, Orange, picking up four of the 11 spectrum blocks.

SFR won three, and Bouygues Telecom and Iliad (trading under the Free brand) gained two each: ven as lead bidder, the total price of the 90MHz acquired by Orange is €854 million, with payments spread over four to 15 years depending on the block.

France was the last major economy in Europe to auction spectrum for 5G after delays due to disagreements about the premise of the auction, then Covid-19. It looks like that preparation paid off.

The process was different to those in many countries, in that each of the four mobile operators allocated a 50MHz block for a set fee of €350 million.

The remaining 110MHz was divided into 11 blocks of 10MHz, and licences to operate these blocks were auctioned, starting on Tuesday at €70 million per block.

Limits on bidding

The four operators were limited to bidding for five blocks each and in every round, the price of a block went up until some bidders dropped out and the remaining number of bids matched the number of blocks.

This happened on Thursday night, when Orange and Bouygues each dropped a bid for one block to end the auction.

Including tho blocks of spectrum allocated at a fixed price, Orange ended up with 90MHz, SFR 80MHz and Bouygues and Iliad 70MHz each.

These allocations were in line with expectations, such as from Jefferies, but the total raised from the bidding was €200 million higher than had been forecast at €2.8 billion – but much lower than €6+ billion raised from corresponding auctions in Italy and Germany.

Encouragement to invest

Stéphane Richard, Chairman and CEO of Orange, commented, “We are very satisfied with the way this auction process went; the result is well balanced and encourages operators to invest.

“With 90 MHz of 5G spectrum, Orange will be able to consolidate its leadership in mobile networks and will develop an efficient 5G network, a guarantee of attractiveness and competitiveness in France."

However, in return for lower prices and the way the auction was set up, the operators must now comply with stringent and ambitious deployment targets, measured in the number of cell sites that support 5G in the 3.4GHz to 3.8GHz band.

The terms stipulate 3,000 sites by the end of 2022, 8,000 at the end of 2024, 10.500 at the end of 2025.

The licence holders are also to improve their 4G network coverage with 75% of sites having 4G+ by the end of 2022.

Jefferies Equity Research notes, “In a data-intensive market like France, operators may compete to bring 5G into service first”.