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France eyes telecom costs
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December 19, 2000: 5:59 a.m. ET
Banque de France investigates whether UMTS loans are putting strain on banks
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LONDON (CNNfn) - France's central bank is investigating whether a recent rush of lending to future-minded telecom companies is putting a strain on banks in France.
The Banque de France said Tuesday it's looking into whether the massive financing demands of telecom buying next-generation UMTS phone licenses throughout Europe are sucking in an overly large portion of lending by French banks.
In its monthly bulletin, the Banque de France, one of the members of the European Central Bank network of 11 countries, said it and France's bank commission are "studying, under the aegis of its regular risk assessments, the exposure of French banks in this sector, in particular as far as mobile telephony is concerned."
The word comes a day after Italy's Olivetti SpA announced plans to seek between  2 billion and 3 billion in new financing – sending its shares into a tumble in Milan.
Many European telecom companies, such as onetime monopolies France Telecom SA, British Telecommunications PLC, and Deutsche Telekom AG, and newer players such as Britain's Vodafone Group PLC and ambitious overseas companies like Hong Kong's Hutchison Whampoa Ltd., have sought licenses in several European UMTS license auctions.
The Universal Mobile Telecommunications Standard licenses will let the companies offer mobile-phone users high-tech services such as fast Internet access and video pictures. The Banque de France said total spending on European next-generation licenses had reached $136 billion.
Companies have relied on a variety of means to pay for the licenses, such as selling shares and bonds and borrowing increasing amounts from the banking system. Demand for syndicated loans soared to $320 billion in the first 10 months of 2000 from $237 billion in 1999 and $149 billion in 1998, the Bank of France said.
"The international banking community is thus under heavy demand," the central bank said.
Credit ratings agencies have lowered their ratings on many telecom companies' debts in recent months as network operators accumulated ever bigger debts. 
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Banque de France
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