* New mobile group Iliad relies on France Tel to carry
* Roaming should be limited to avoid distortion-regulator
* Opinion paves way for operators to negotiate network
(Network sharing details)
By Leila Abboud
PARIS, March 11 France said new low-cost mobile
operator Iliad should end its roaming deal with France
Telecom by 2018 at the latest and called for closer
scrutiny of its effort to build its own network.
Rivals Bouygues Telecom and Vivendi's SFR
have criticised newcomer Iliad for dragging its feet on its
network roll-out and relying too heavily on France Telecom to
carry customer traffic while building its own.
France's Socialist government asked the competition
regulator in November to study whether the contract conferred an
advantage to Iliad and risked distorting the market.
On Monday, the regulator ruled that Iliad should not be
allowed to rely on roaming past 2018 when its current contract
with France Telecom ends.
It also called for a more interventionist approach to ensure
that the new mobile player built a functioning network, such as
an audit of its network investments and a calendar for roaming
to be eliminated by geographic area.
"The real objective is the building of a fourth network that
Iliad can use to serve its customers and respect its licence
obligations, and roaming can be a part of that at the beginning
but not forever," said Bruno Lassere, the head of France's
competition regulator at a briefing on Monday.
Iliad's Free Mobile has captured 8 percent of the French
mobile market since its launch in January 2012, signing up 5.2
million customers and touching off a fierce price war.
France Telecom and Iliad declined to comment on Monday.
Iliad pays 500-700 million euros a year to France Telecom
under the terms of their contract through 2018.
Iliad or France Telecom can also choose to end the roaming
contract in 2016.
Average revenue per mobile user (ARPU) fell 10 percent to
336 euros last year, according to the telecom regulator, with a
further 10 percent drop predicted by France Telecom this year.
SFR and Bouygues have already launched staff cuts and other
cost-cutting measures, while France Telecom is relying on
attrition to reduce staff costs.
Investors, sector executives and bankers have speculated
that competition could lead to consolidation among the four
telcos or network infrastructure sharing deals to cut costs.
The government and the competition watchdog have signalled
that they are against a return to three mobile operators, so
network sharing is now the more likely option.
In a second part of Monday's ruling, the competition
regulator laid out the criteria it would use to evaluate such
network sharing deals, including whether they applied to cities
or rural areas and the type of equipment involved.
The combined market power of the companies proposing to
share equipment will also be considered, said Lassere.
That effectively rules out network sharing between the two
largest players France Telecom and SFR, since it would give them
too great sway on the market.
The guidelines on network sharing are likely to touch off
renewed talks among France's mobile operators as they seek ways
to restore profitability amid deep price cuts.
Second and third-place players SFR and Bouygues held talks
last year about network sharing outside major cities, and France
Telecom has also said it would be open to such collaboration.
(Reporting by Leila Abboud; Editing by Lionel Laurent and Paul