French government 'unlikely' to reduce cost of UMTS

Bouygues' decision to retire from the French UMTS auction is unlikely to force the government to back down from high licence prices according to analysts.

Both of the remaining contenders, incumbent France Telecom and challenger SFR from Vivendi, have confirmed their willingness to pay in order to deploy UMTS services as soon as possible. The licences are therefore likely to be distributed. It is further possible that a second tier of competitors, availing themselves of GPRS networks and EDGE technology, will develop mobile 3G services alongside the main operators. Bouygues cited the E4.95bn (£3.15bn) licence price being demanded by the French government as prohibitive to its continued participation in the contest. The same reason was given by both Suez Lyonnaise des Eaux and Telefonica as they withdrew last week. By Jean Rognetta