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More firms, more competition? The case of the fourth operator in France's mobile phone market

Author

Listed:
  • Louis de Mesnard

    (LEG - Laboratoire d'Economie et de Gestion - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique)

Abstract

To foster competition the French government authorized a fourth operator, ‘Free', to enter the country's mobile phone market at the end of 2009 alongside Orange, SFR and Bouygues Telecom (BT), who held respectively one-half, one-third and one-sixth of the market. By using a stylized model of France's phone market, we have examined what we call the regulator's nightmares and dreams. If Cournot competition is in place before Free's entry, minimizing the total profit fails to maximize the consumer surplus and the total surplus; the maximum most realistic price fall is 6.7% compared to three-way competition and could be 1.7% only; if Orange, SFR and Bouygues Telecom extend competition to Free, this situation will be sustainable. If Orange, SFR and Bouygues Telecom are in monopolistic cartel, an extension to a monopolistic cartel of four or a switching to four-way Cournot competition are equally unlikely; Orange, SFR and Bouygues Telecom can only place Free in their competitive fringe, which is not so bad for the regulator; however, Orange's incentives will push to four-way competition if Free is poorly competitive.

Suggested Citation

  • Louis de Mesnard, 2010. "More firms, more competition? The case of the fourth operator in France's mobile phone market," Post-Print hal-00546876, HAL.
    • Handle: RePEc:hal:journl:hal-00546876
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    2. Son, Pham Hai & Son, Le Hoang & Jha, Sudan & Kumar, Raghvendra & Chatterjee, Jyotir Moy, 2019. "Governing mobile Virtual Network Operators in developing countries," Utilities Policy, Elsevier, vol. 56(C), pages 169-180.
    3. Chen, Xu & Wang, Xiaojun & Chan, Hing Kai, 2016. "Channel coordination through subsidy contract design in the mobile phone industry," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 97-104.
    4. Michel Berne & Pierre Vialle & Jason Whalley, 2019. "An analysis of the disruptive impact of the entry of Free Mobile into the French mobile telecommunications market," Post-Print hal-02147914, HAL.
    5. Louis de Mesnard, 2025. "Are Operating Margin, Markup and Unit Margin Good for Profit? An Approach Based on Microeconomic Theory," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(6), pages 3375-3383, September.
    6. Gutiérrez-Hita, Carlos & Rodríguez, Santiago Budría & Nasirov, Shahriyar, 2025. "The evolution of competitiveness in the Chilean mobile market," Utilities Policy, Elsevier, vol. 96(C).
    7. Yang, Shengxing & Vialle, Pierre & Whalley, Jason, 2025. "Is disruption the second time around easier? The case of Iliad and the Italian telecommunications market," Telecommunications Policy, Elsevier, vol. 49(8).
    8. Berne, Michel & Vialle, Pierre & Whalley, Jason, 2019. "An analysis of the disruptive impact of the entry of Free Mobile into the French mobile telecommunications market," Telecommunications Policy, Elsevier, vol. 43(3), pages 262-277.

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