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Mon 12 Oct 2009 08:30 PM

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Orascom won't bid for fourth French 3G licence

UPDATE 2: Owner previously indicated interest in licence to French paper. 

Egyptian Orascom Telecom said on Monday it would not bid for France's fourth 3G mobile licence, removing a deep-pocketed candidate from the running two weeks before the deadline for offers.The decision was a turnaround from July when owner Naguib Sawiris told French newspaper Le Figaro he was interested in entering the French mobile market. The Egyptian businessman owns and runs Orascom Telecom and parent Weather Investment.

At that time he said Orascom would consider any type of partnership or alliance to bid for the fourth mobile licence. Since then, Orascom has been in talks with French cable operator Numericable and Bollore Group, among others, analysts said.

A spokeswoman for Orascom did not give any reasons why the company decided not to bid. "It was announced today in our analyst day that OT/Weather will not be bidding," she said.

According to one analyst present at the event in Paris, however, Sawiris described the regulatory conditions as too difficult. "I think the terms themselves were obviously not attractive enough or value-accretive," said Beltone Financial analyst Shrouk Diab, from Cairo.

The entry of a new player into Europe's third-largest telecom market could reshape what has long been one of the most profitable mobile markets. The licence will cost 240 million euros ($353 million), with bids due by Oct. 29.

Analysts say a fourth entrant risked lowering prices and pressuring mobile margins at France Telecom , Vivendi's SFR mobile unit, and Bouygues Telecom.

News that Orascom was out of the running was positive for France's second-biggest broadband provider, Iliad, seen as the leading candidate for the licence.

Iliad already has a very profitable business selling "triple play" packages of fixed phone, TV and broadband services.

But analysts said Iliad needed to move into mobile to help it compete against rivals like France Telecom, SFR and Bouygues Telecom, which can offer "quadruple play" packages.

Bouygues launched such a bundle in May that included mobile and fixed calls, Internet and TV for 49 euros a month.

Orascom's withdrawal also removed a potential partner for French cable operator Numericable and virtual mobile operator Virgin Mobile.

Both companies have said they were interested in the licence, and analysts thought they might team up on an offer with investors such as Orascom.

A spokeswoman for Numericable, which is not listed and is backed by private equity investors, declined to comment on whether it had been in talks with Orascom or on their outcome.

"We are studying the issue of bidding on the licence, but no alliance has been secured at this stage," she said. (Reuters)

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