French government slams Iliad's low-cost 4G offers

PARIS Wed Dec 4, 2013 10:44am EST

PARIS Dec 4 (Reuters) - France's government expressed concern on Wednesday that new mobile offers from low-cost operator Iliad, which include superfast broadband known as 4G without a price hike, will hurt investment and employment in the telecom sector.

Iliad's move on Tuesday to add 4G, which offers five times faster mobile broadband speeds than earlier technology, upped pressure on France's leading telecoms operators, Orange , Vivendi's SFR and Bouygues Telecom . They had hoped their newly built 4G networks would command higher prices and help to restore profits hit by the emergence of Iliad, which has taken 10 percent mobile market share since early 2012.

In a statement, two ministers warned that Iliad's claim to offer 4G speeds despite its network not yet covering much territory risked confusing consumers and tarnishing the image of the new technology.

"As Iliad builds out its mobile network, the announcement of the operator seems to be a risky and audacious bet," wrote Arnaud Montebourg, industry minister, and Fleur Pellerin, junior minister for telecom and digital issues.

"A low-cost strategy inevitably leads to under-investment in infrastructure, poorer service, and the destruction of jobs."

The state owns 28.4 percent of Orange, previously France Telecom, which is Europe's fourth-biggest telecom operator by sales.

Iliad's announcement on Tuesday sent Orange, Vivendi and SFR shares lower as investors digested the impact of the newcomer's move on the leaders attempts to pass through price rises for new 4G services.

At 1529 GMT on Wednesday, Orange shares were up 0.5 percent, Vivendi was down 0.9 percent, Bouygues was 0.3 percent lower, and Iliad was down 0.8 percent.

Iliad was not immediately available to comment.

(Reporting by Leila Abboud and Gwenaelle Barzic; Editing by Elaine Hardcastle)