UPDATE: French Court Rejects Iliad's Demand For New Auction Rules

France's highest administrative court Wednesday rejected a request by French telecommunications firm Iliad SA's (ILD.FR) Free brand to change the terms of an upcoming auction of fourth-generation mobile frequencies.

The judge ruled that Free failed to demonstrate that the current auction rules would hurt the French company's interests significantly, or change the market's competitive structure, according to a statement.

A spokeswoman for Iliad declined to comment.

Free contested the terms of the auction, arguing that requiring an upfront payment for the licenses put companies with deep pockets at an advantage.

Bouygues Telecom, a unit of Bouygues SA (EN.FR), as well as several unions such as the CFE-CGC, have also filed complaints contesting some terms of the auction. A spokeswoman for Bouygues Telecom declined to comment on the court's decision.

Iliad and Bouygues compete with larger rivals SFR, owned by Vivendi SA (VIV.FR), and France Telecom SA (FTE).

Obtaining 4G spectrum--which allows for faster downloads on handsets--is crucial for operators eager to exploit a recent explosion in mobile data traffic. Operators are due to submit bids for the spectrum this month.

The French government is hoping to raise at least EUR2.5 billion from the auction.

-By Noemie Bisserbe, Dow Jones Newswires; [phone]; [e-mail]