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Iliad’s Free Sues Vivendi’s SFR on Subsidized Mobile Phones

Free, the French mobile-phone service owned by Iliad SA, sued Vivendi SA unit SFR, claiming its offer to subsidize handset purchases to customers who sign a service contract constitutes unfair competition.

Free filed the complaint in May to the Paris commercial court, a spokeswoman for the company said today, confirming comments by Xavier Niel, who founded broadband-provider Iliad, in today’s issue of Capital magazine.

The subsidies, which depend on the consumer committing to a one- to two-year service contract, are effectively hidden consumer credits that skirt the rules governing such offers, and therefore constitute “usury rates of 300 to 400 percent that consumers don’t see,” Niel said to Capital.

Iliad gained 2.6 million mobile subscribers in the first 80 days since it became France’s fourth mobile-network operator this year, offering discounted packages starting at 2 euros ($2.46) to make inroads into the market. SFR, the wireless arm of Vivendi, met with unions this month to discuss plans to cut costs as it seeks to slow customer defections to Free.

No hearing has been scheduled, the spokeswoman said, declining to be named as the matter is pending before the court.

The SFR press office didn’t immediately respond to requests for comment on the lawsuit.

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