PARIS France's two biggest mobile phone groups have been fined a total of 183 million euros ($239 million) for distorting competition and harming smaller rival Buoygues (BOUY.PA) by offering deals which included free unlimited calls between subscribers to the same operator.
"They helped to lock up the market by attracting customers to the two biggest networks and keeping them in once they had made a choice," the Competition Authority said on Thursday.
Orange-owner France Telecom FTE.PA was fined 117 million euros, while Vivendi's (VIV.PA) SFR must pay 66 million euros for offering the deals that disadvantaged the smallest operator, Bouygues Telecom (BOUY.PA).
The regulator said it hit France Telecom with a higher fine because it was the group's sixth incident of anti-competitive practice in 15 years.
Thursday's decision stemmed from a complaint filed in October 2006 by Bouygues and relates to the period 2005-2008.
Since Bouygues had only 17 percent of the market it could not match rivals' offers because in-network calls were less frequent for its customers, the regulator found.
Bouygues had to respond with unlimited offers that actually hurt its profitability because of higher call termination costs, which operators pay each other when a person calls from one network to another.
France Telecom said on Thursday that Bouygues had long benefited from regulatory measures, including getting higher call termination fees, as a result of its smaller size and status as the newest operator at the time.
"Orange will exercise its right to appeal in the courts," the group said, adding that the fine had been anticipated in its accounts.
A spokesman for SFR said it too would appeal the decision.
Bouygues said: "The decision recognizes the anticompetitive practices that Bouygues was a victim to for a number of years. We are reading the decision in detail and we will ask for damages for the harm".
The fines aren't likely to have a big impact on France Telecom and Vivendi since they generated net profit last year of 3.89 billion euros and 2.95 billion euros respectively.
France Telecom shares closed up 0.25 percent at 8.55 euros, Vivendi was up 0.3 percent at 17.12 euros, and Bouygues was up 0.7 at 21.43 euros.
(Editing by Dan Lalor and Elaine Hardcastle)