France Invalidates DTT Spectrum Transfer Tax

France's constitutional court invalidated on December 28 a proposed law that would have imposed a 5% tax on any change of control of a DTT broadcaster.  The objective of the law was to allow the French state to recover part of the benefit derived from the sale of digital  terrestrial television frequencies that initially were licensed without charge.  Upon review, however, the constitutional court invalidated the law because of a technical defect.

The proposed law stated that the tax became due upon the decision of the broadcast regulator CSA authorizing the change in control of the DTT broadcaster.  However, French law technically does not require the CSA to give its approval of changes of control of DTT licensees.  It is common practice to ask the CSA for approval in order to avoid the risk of the authority annulling the DTT license after the closing, but the French broadcasting law does not expressly require such approval.  Consequently there may be instances when a change of control occurs but there is no CSA decision, in which case the tax could not apply.  This situation created a flaw in the drafting that in the court's view made the law unconstitutional.

The idea of taxing DTT spectrum transfers arose when France's Canal + group offered in 2011 to purchase two DTT channels owned by groupe Bolloré.  Those sales are still pending.  Politicians voiced concerns that Groupe Bolloré would receive a windfall from the sale because the DTT frequencies were granted without charge. 

Under the proposed tax, the French state would be entitled to receive 5% of the purchase price in connection with any transfer of shares of an entity holding a DTT license.  Transfers within a corporate group would be exempt, as would transfers for a price of less than € 20 million.  The tax would only apply to the first transfer.