KPN has second thoughts on French UMTS race

Dutch telco KPN may pull out of a Telefonica-led consortium to bid for a French UMTS licence after it claimed there were other, less expensive and quicker ways to gain a foothold in France.

The admission comes after other operators questioned the wisdom of entering potentially crippling bidding wars for licences which have no concrete return on investment. A KPN spokeswoman told silicon.com: "We are not certain if we will bid, we are still making up our minds as UMTS is not the only way to get into the French market. If we bid in France we would not have a service for another two or three years and it is a lot of money. We have to see if the investment is good enough for the potential fiscal outcome and we want to be practical and reasonable." She added that one option could be to tie up with a network operator as the company did in Japan with NTT DoCoMo. "We are considering using DoCoMo's iMode technology on another technology base, such as our network operators in Germany and Belgium, and build up a range of services and content that is so interesting that other network operators in France would want to join our joint ventures," she said. Robin Bothsworth, director at Schema, claimed that rollout costs could deter KPN. He said: "They have to weigh up the cost of implementation, potential revenue, terminal value of the share price of business. Germany and Britain commanded high prices for UMTS because the population is dense and the area is geographically small so rollout costs are relatively low. But what we are seeing in the Southern and Eastern European countries is an area that is geographically large, low income and immature market. This could be the case in France as it is larger than the UK, mobile penetration is lower so I suspect the cost benefit is lower than in other countries." Jean Louis Pierrel, e-business consultant, IBM agreed. He said: "The main issue here is the equipment fee. At the end of the year half the French population will have mobiles. That's 30 million people, so it is not a little market. But France is a very large country and the installation costs of the infrastructure would be very high." However, he also warned that fierce competition for the licences could influence KPN's decision. "There are only four licences for sale and three will go to incumbent operators SFR/Cegetel, France Telecom's Itineris and Bouygtel, which means there is only one extra place. We expect the fourth licence to go to a joint venture between a French and other European telco but who knows."