Competition in Mobile Telephony in France and Germany

This paper provides an insight into the antitrust investigationinitiated by the French competition authority, which found that mobileoperators exchanged strategic information and agreed to fix marketshares in years the 2000-2002. The empirical analysis is based on thecomparison of mobile markets in France and Germany and uses aggregateindustry-level data on subscriptions and prices. The penetration ofmobile phones at the end of 1999 was higher in France than in Germany,but this situation was reversed by the end of 2002. In the same timeperiod, minimum prices of mobile services in France, computed for adefined low-usage basket, were on average by about 58% lower than thecorresponding prices in Germany. The results of binomial logit demandestimation suggest two explanations for this situation. First, there isa significant difference between price elasticities of demand in thesetwo countries. Second, consumers seem to perceive mobile telephony as asubstitute to fixed-line connection in France and as a complement inGermany. However, in a separate reduced-form estimation we do not find asignificant effect of prices for fixed-line services on mobile prices ineither country. Furthermore, the estimation results suggest that theshare-fixing agreement in France could have slowed down subscriptions,but we fail to find that it had an adverse effect on prices.