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Bouygues throws down the gauntlet to SFR

Bouygues Telecom wants to be France’s second-largest mobile operator by 2026.

This is doubtless a long-harboured ambition, but the telco made it official at its capital markets day late last week, at which it unveiled an aggressive growth plan for the next five years.

The company marked its 25th anniversary with the launch of its Ambition 2026 plan, a multi-faceted strategy through which it aims to become the second-largest mobile operator in France after incumbent Orange and, in its own words, “a major player in fibre,” amongst other things.

In many ways, the plan lacks detail, but it’s pretty clear that is essentially centred around the integration of Euro-Information Telecom (EIT), the alternative operator acquired by Bouygues Telecom last year; the deal received regulatory approvals and closed on 31 December. EIT styles itself as France’s fifth telecoms operator, offering Internet and TV packages as well as MVNO operations under various brands with 2 million customers.

That deal, as much as Bouygues’ subsequent overt targeting of the number two spot, will have given its current holder SFR pause for thought.

According to Bouygues, its mobile market share excluding M2M stood at 16.4% in Q3 last year, putting it in fourth place behind Iliad with 18%, SFR with 24% and leader Orange with 30.3%, although it is bigger than Iliad when M2M customers are factored in. The telco’s mobile customer base at that date was 12.3 million, thus we can extrapolate that the addition of EIT’s 2 million customers would up its market share by somewhere between two and three percentage points. That puts it ahead of Iliad but still leaves it some way behind SFR.

However, it’s about much more than the additional customers EIT brings with it. Bouygues acquired EIT from Crédit Mutuel and at the same time signed a long-term distribution deal that will enable the sale of its fixed and mobile services via the French bank’s network of 4,200 branches.

While areas of Bougues Telecom’s growth plan might seem a little vague – its intention to “benefit from” last year’s brand revamp, for example – adding customers, sub-brands and a broad distribution network via M&A is pretty straightforward. It’s questionable whether that will be enough to see it snag the number two spot in mobile in as little as five years, but it’s certainly a good start.

Other facets of Bouygues’ Ambition 2026 plan include the goal to gain 3 million new FTTH customers in that period; double FTTH network coverage from an estimated 17 million premises at the end of last year to 35 million at the end of 2026 (with an interim target of 27 million by end-2022); double market share in fixed B2B; and become a wholesale fixed player.

On the financial front, Bouygues Telecom expects to significantly increase revenues and earnings during the period. It has set a target of generating more than €7 billion in sales from services in 2026, up from an estimated €4.9 billion in 2020 – its full-year results are due for publication on 18 February – and EBITDA after Leases of around €2.5 billion, up from €1.5 billion, increasing its margin to 35% from 31%. It is also aiming for free cash flow of around €600 million, compared with an estimated €250 million last year and €300 million in 2019.

Those are ambitious targets. Bouygues Telecom did not call its new strategic plan Ambition 2026 for nothing.

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