France: Telecom and Information Technology Update

UNCLAS SECTION 01 OF 03 PARIS 002910 SIPDIS STATE FOR EB/CIP AND INR/B USDOC FOR NTIA AND ITA FCC FOR INTERNATIONAL STATE PLEASE PASS TO USTR E.O. 12958: N/A TAGS: ECPS ETRD FR SUBJECT: France: Telecom and Information Technology Update NOT FOR INTERNET DISTRIBUTION ¶1. This is another in a series of periodic updates on the French telecommunications and information technology sectors, including internet and e-commerce. Contents: -- France Telecom's debt on the rise (para 2) -- GOF technology and information society office merged with regional and small business administration (para 3) -- France's antitrust watchdog wants more open mobile market (para 4) -- Tele2 France to launch mobile offering (para 5) -- FT's Orange EDGEs way to business community (para 6) -- Cegetel resumes merger talks with Neuf Telecom (para 7) -- Alcatel tests WiMax in France (para 8) -- ART launches public consultations on professional mobile networks (para 9) -- FT to select single global advertising firm (para 10) -- French resistance to (what they see as a) "hyperpuissant" (over-dominant) Google (para 11) ¶2. France Telecom's debt on the rise: France Telecom (FT) has seen its debt rise by 6 billion Euros to 49.9 billion Euros (one euro equals 0.77 dollars),as it conforms to new International Financial Reporting Standards (IFRS) accounting rules. The aim of the new rules is to harmonize the global presentation of financial results, making it easier to compare companies across borders. Under the new IFRS rules, FT's 2004 operating profit has been reduced to 9.3 billion Euros from 10.8 billion Euros previously. FT said the move to International Financial Reporting Standards would not impact its ongoing operating performance. FT is in the third and final year of a recovery plan to reduce its debts to less than 40 billion Euros by 2006. The firm built up its vast debts due to an ambitious expansion plan in the late 1990s. Its debt peaked at nearly 70 billion euros in ¶2002. ¶3. GOF technology and information society office merged with regional and small business administration: A Government order published earlier this year provided details on the on-going reorganization of the French Ministry of Economy, Finance and Industry. As part of that effort, the familiar DIGITIP ("Direction General de l'Industrie des Technologies de l'Information et des Posts") and its Office of Technology and Information Society ("Service des Technologies et de la Societe de l'Information" - STSI) have been merged with the office for regional business and small and medium-sized industrial enterprises. Since the merger, the new entity is called the General Enterprise Directorate ("Direction General des Entreprises") in charge of business policy, information and advocacy of innovation and entrepreneurship. STSI is still responsible for electronic components, electronics, computer and audiovisual equipment, electronic communications, information society and space. Also, the organization of STSI remains the same with four separate bureaus or "sub- directorates": 1) networks, multimedia and on-line communications; 2) components, software and professional electronics; 3) regulation of electronic communications and forecast and analysis; 4) institutional relations. STSI is not located within the main Ministerial offices, but as before in a close by annex. ¶4. France's antitrust watchdog wants more open mobile market: Arguing that France's mobile phone market remained dominated by three companies (France Telecom's Orange, SFR/Cegetel, and Bouygues Telecom),France's competition watchdog, the Competition Council, in early April called on French telecoms regulator ART to intervene. The Competition Council reportedly sees elements of collusion by the three mobile phone operators, particularly in the wholesale market. In an effort to break this collective dominant position, ART has examined giving more space to mobile virtual network operators (MVNOs). These operators have no mobile networks of their own, but they rent minutes wholesale from the network operators and sell them to consumers at a lower cost, undercutting the incumbents' offer on the market. This opens up the possibility of further liberalization of the French mobile phone market, lowering costs for consumers but eroding the profit margin of operators. ¶5. Tele2 France to launch mobile telephony offering: Telephone operator Tele2 France announced in early April that it had signed a mobile virtual network operator agreement of the enhanced service provider type with Orange France. No financial details were disclosed. Tele2 France will launch the mobile telephony offering before the end of ¶2005. ¶6. FT's Orange EDGEs way to business community: France Telecom subsidiary Orange will invest 200 million Euros in France to shift its lower quality, mobile network capabilities to high-speed data technology known as EDGE (Enhanced Data for Global Evolution). The two-year investment plan, which makes Orange the first French mobile operator to sell EDGE technology, is aimed at expanding Orange's offering of high-speed data services, such as Internet access and television programming via internet, to 90% of businesses with over 50 employees, and 85% of individual subscribers. EDGE does not carry as much data as third generation, or 3G, technology can, but it costs operators less and provides data at a speed close to that of 3G quality. The launch of EDGE will reduce Orange's dependency on 3G mobile technology. It also brings the number of Orange customers using Orange high-speed services (via EDGE, 3G and WiFi technologies) to a total of two million. ¶7. Cegetel resumes merger talks with Neuf Telecom: French fixed telecom operator Cegetel, has resumed merger negotiations with rival Neuf Telecom. Talks originally fell through last year over price and management issues. (See our April 2004 edition for more details.) If successful, the merger would signal further consolidation in the French telecoms market, as telecom operators seek to boost their broadband offerings. In mid-April 2005, Italian incumbent Telecom Italia acquired Tiscali's French internet subsidiary Liberty Surf, which exceeds both Cegetel and Neuf Telecom in its number of ADSL subscribers. The merged company would become the largest broadband internet provider after the market leader, France Telecom's Wanadoo. With a high demand for broadband services, competition for new customers has been intense and operators have been slashing prices. ¶8. Alcatel tests WiMax in France: In early April, French telecoms equipment manufacturer Alcatel signed a partnership agreement with Paris airports service provider ADP Telecom for a trial of WiMAX technology. ADP is to manage the pilot networks, which will be deployed across a number of airports in France. ADP said it would use the fixed and nomadic aspects of WiMAX as a complementary technology to its existing WiFi offerings, and as a method of delivering mobile applications across a greater distance. The news follows an announcement last month that French telecoms regulator ART has been preparing the means of allocating new frequencies in the 3.4-3.8GHz band for the deployment of WLL networks to allow for the development of WiMAX technologies. The regulator said that the auctioning of such spectrum was one possible option, although the authority has not yet set a date for the tender of the licenses. ¶9. ART launches public consultations on professional mobile networks: On April 12, France's telecoms regulator ART launched consultations on the introduction of broadband terrestrial mobile service networks, with specific features, such as independent Private Mobile Radio or PMR networks, which include alternating voice services (push to talk), group calls, voice and data services in packet mode; and Public Access Mobile Radio or PAMR networks, which are open to the public and carry PMR functions. This consultation is part of the move to shift mobility to high speeds. Although it covers both independent PMR and PAMR networks, the question of whether to introduce open to the public PAMR networks (in the 450-470 MHz band) is the primary subject of the consultations. Based on responses, ART will be able to establish the method and means of allocating available frequencies for broadband PMR/PAMR networks in autumn 2005, and launch an allocation procedure by wintertime. ¶10. FT to select single global advertising firm: France Telecom will soon appoint a single advertising agency to globally market all of its communications brands, including Orange and Wanadoo. Company executives have said that they will meet with some 30 contenders in Paris, and the winner will be announced this summer. The successful agency will develop a global ad strategy that sources have described as "France Telecom's grand plan" and could involve a rebranding. There is ongoing speculation that Orange and Wanadoo are considering merging their businesses in the UK following talks that began in 2004. ¶11. French resistance to (what they see as a ) "hyperpuissant" (over-dominant) Google: In a replay of his stillborn efforts two years ago to create a French version of CNN, President Chirac called on his Culture Minister and on the Head of France's National Library to create a homegrown effort to scan and digitize French texts so that they can be viewed on the Internet. This move follows Google's announcement last December to scan millions of books and periodicals into its search engine over the next few years. In an unrelated development, Google recently met with another type of French resistance, this time from two travel companies, Luteciel and Viaticum. The two companies successfully challenged Google's practice of selling Internet advertising from rivals designed to appear with Web searches for the trademarked Web site name "Bourse des Vols," or flight exchange. In March, A French Court of Appeals found Google guilty of "trade counterfeiting." This is an important precedent in a country where 15 similar cases are still pending. WOLFF