TEXT-Fitch:Network sharing key to impact of French spectrum auction

Mon Sep 26, 2011 4:54am EDT

(The following statement was released by the rating agency)

Sept 26- The likely outcome of Iliad's winning of fourth generation (4G) French mobile spectrum in the auction on 22 September illustrates the opportunities provided by partnership between companies, Fitch Ratings says. Iliad's capex-lite strategy to date suggests roaming will continue to form a significant part of its operations. This strategy is expected to be a useful source of revenue both to Iliad's roaming partner, currently France Telecom (A-/stable), and TDF Group, France's largest towers business.

The capex demands of 4G will put pressure on mobile operators' cash flow generation throughout Europe. This makes network sharing or roaming more likely, providing opportunities to those players with the flexibility to invest, and to third party network providers such as towers businesses.

The French auction, the first of two, was for the less desirable 2.6GHz spectrum. Total receipts were EUR936m, roughly a third above the reserve price. This is broadly in line with Fitch's expectations for these auctions, which are expected to be far less costly than the 3G auctions in 2001. The more attractive 800MHz spectrum, with reserve price of EUR1.8bn, will be auctioned later in 2011, with results expected early 2012.

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