France sold off a first batch of fourth-generation mobile frequencies for 1.28 billion, granting licenses to all four major telecom operators in an auction that will structure the market for years to come.
Telecoms regulator ARCEP said France Telecom (Paris, France) and soon-to-be new mobile player Iliad (Paris, France) put in the highest bids to win the two larger blocks of 20 megahertz.
Vivendi's SFR (Paris, France) and Bouygues Telecom (Paris, France) were given smaller blocks of 15 MHz, ARCEP said in a statement on Thursday.
The mobile frequencies sold in the first round were in the 2.6 GHz band, which means they are of lower quality than those set to be sold in a second round in mid-December.
Such 4G frequencies are crucial to allow telecom operators to deliver fast mobile connections for customers surfing the web on tablet computers and smartphones, a lucrative and fast-growing market.
The first round of the auction is seen as a success by the government because it raised more than the minimum of $946 million it had expected while also granting licenses to all four companies.
French Prime Minister Francois Fillon welcomed the results, saying in a statement that the government had succeeded in balancing the need to protect competition on the mobile market with fairly valuing a "rare public resource".
Before the bidding, smaller operators Iliad and Bouygues had lobbied hard for lower prices and special protections to prevent bigger players France Telecom and SFR from scooping up most of the frequencies and establishing an unassailable advantage.
According to ARCEP, market leader France Telecom bought a block of 20MHz for $387 million and agreed to host virtual mobile operators (MVNOs) on its network.
Such MVNOs buy minutes and volumes of data traffic on other operators' networks and then market offers to clients, and are seen by regulators as a positive way to spur competition in the market. Virgin Mobile is the largest one in France.
New player Free Mobile, owned by Iliad, also won a 20MHz block for $366 million and promised to host MVNOs. Free Mobile, which has pledged to cut prices deeply, is expected to launch its service in the coming months.
Bouygues Telecom, currently the third-biggest mobile operator, will be allocated a block of 15 MHz in exchange for $308 million and a promise to host MVNOs. The second-biggest operator, Vivendi's SFR, managed to secure a block of 15 MHz for less than its rivals paid, offering $202.7 million, and did not commit to hosting MVNOs.
All four companies are expected to submit bids in the next round of the auction, for which the government has set a minimum price of $2.4 billion.
The second round of the auction will offer "golden frequencies" in the 800 MHz band, so dubbed because they allow mobile signals to travel long distances without losing strength.
Similar 4G auctions are now being carried out in Spain, Italy and the United Kingdom, while Germany sold off its 4G licenses last year.
(Editing by James Regan)