Since Iliad, which markets its services under the brand name Free, launched its new ultra low cost mobile offers three weeks ago, it has faced criticism from rivals that its network was not up to scratch and its customer service poor.
A media storm ensued with some reports saying Free was turning off its own overloaded mobile antennas and sending traffic over France Telecom's network under a roaming agreement. Such a step would violate Free's license because it must cover 27 percent of the population with its own antennas to be able to have the right to roam on France Telecom's network.
Free denies that it turned off all or parts of its network, Chief Executive Maxime Lombardini told Reuters.
He welcomed the inquiry by the French regulator.
"Our competitors are trying to make it seem to consumers that there is a problem with our network. There isn't," said Lombardini. "When you are faced with false rumors, the best thing to do is get back to the real facts."
ARCEP said on Friday in a statement that no telecom operator had filed a formal appeal, not had any concrete elements been brought to its attention to back up the allegations.
"Nevertheless, for the sake of transparency and peace of mind, ARCEP decided it would be useful to ask Free Mobile to provide an updated version of the information on the status of its network," the regulator said.
This would include a list of installed towers and those that have been activated, as well as any reason for shutting off some of the towers in its network, the regulator said.
ARCEP said the results of the inquiry would then be made public.
The regulator has already audited Free's network once before its launch to make sure that it had reached its obligation to cover 27 percent of the population.
The controversy comes at turbulent time for Europe's third-largest telecom market where the existing players, former state-owned monopoly France Telecom, Vivendi's SFR (VIV.PA), and Bouygues Telecom (BOUY.PA), are scrambling to defend their turf and profits from the new arrival Iliad.
Iliad touched off a price war on January 10 with an offer of unlimited calls to France and most of Europe and the United States, unlimited texts, and 3 gigabytes of mobile data for 19.99 euros ($25.83) per month.
Since then France Telecom, SFR, and Bouygues have all lowered prices of some of their mobile offers to blunt the impact of Free. But they are not cutting prices across the board since that would take a huge chunk out of their profits, analysts say.
(Reporting by Leila Abboud; Editing by Jodie Ginsberg)
Posted by Jason Lomberg, Technical Editor