French connections: France country profile

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French Connections

The French market is facing an inevitable slowdown as it reaches saturation point. According to Informa Telecoms & Media’s World Cellular Information Service, France had a market penetration of 90.72 per cent in March 2008, up from 84.58 per cent for the same period last year. Three network operators dominate the French mobile market: Orange with 26 million subscibers, SFR with 20 million and Bouygues Telecom with 9.4 million. A large number of MVNOs operate in France but they have thus far struggled to make an impact.

Indeed, a European Commission report, Progress Report on the Single European Electronic Communication Market, 2007, judged the French mobile market “not competitive” and highlighted how MVNOs have failed to introduce effective competition in France.

The report points out that, of the 13 MVNOs operating in the French market, none has control over network elements and their market share has increased only slightly. One reason for the limited impact of virtual operators is the restrictions imposed by the mobile operators on the provision of access to their networks; which is compounded by a lack of relevant regulation.

Overall, the market has remained relatively unchanged in terms of penetration, market share, prices and competition in the past few years, according to the report. In the five years to December 2007, SFR’s market share remained flat, while Orange lost two percentage points in favour of Bouygues. In broad terms, however, the market is not dynamic, the report states.

The Commission’s report also noted that the market shares of the three main mobile network operators have not been affected by the introduction of number portability (MNP) a year ago. France introduced ten-day MNP in May 2007 to speed up the process, which was considered too lengthy and complex. The three mobile network operators were happy with the new rules but the MVNOs said they did not go far enough and pointed out that mobile number portability can be effected overnight in many other European markets.

As with other mature markets, where voice revenues are falling away, the carriers have turned their attention towards data, specifically the mobile internet. SFR was one of the first operators in the world to launch an HSDPA service, in May 2006, under the 3G+ brand, offering speeds of up to 3.6Mbps. It was also the first of the French trio to reach three million 3G subscribers (in March 2007). Orange launched HSDPA in November 2006. While, Bouygues Telecom’s launch of WCDMA was fairly late coming in April 2007.

After a disappointing Q307, when 3G subscriptions increased by just 7,000, SFR revamped its offering and managed to record more than 650,000 3G net additions. The pace of growth of the 3G base is still slower than in Q406, but the operator is offering more attractive data-based products.

SFR’s principal 3G service in Q407 was mobile internet browsing. The service began to gather momentum at the end of the year, resulting in an increase in customer-adoption rates in the first part of 2008.

The operator’s net data revenues represented 13.7 per cent of its total service revenues at end-Q407, compared with 12.8 per cent at end-Q406. This resulted in data ARPU of Eur5.57 ($8.20) in Q407, an increase of almost nine per cent year-on-year. SFR’s ARPU is still lower than its competitors’ but is growing. In terms of overall ARPU, however, although all operators experienced a decline, SFR saw the biggest fall, from Eur37.92 in Q406 to Eur36.67 in Q407.

SFR launched the Illimythics unlimited mobile internet offer at the start of November last year, in a move designed to forestall the launch by Orange of Apple’s iPhone, which was scheduled to take place at the end of the month.

The service had attracted 250,000 subscriptions by end-January 2008, up from 173,000 at end-Q407 – well above the initial target of 100,000. A key factor in Illimythics’ success is the strength of its branding. It has received the endorsement of established internet brands such as Google, YouTube, DailyMotion, eBay and Windows Live Messenger.

Orange responded to SFR’s Illimythics flagship tariff for mobile broadband browsing by launching a new set of tariffs in February 2008 under the Ten by Orange brand. Ten started operations in June 2006 as an MVNO hosted on Orange’s network and was acquired by Orange in November 2007.

Ten by Orange is a series of simple packages with unlimited internet services, including web browsing, email and Windows Live Messenger. Tariffs start at Eur39.90. The positioning is similar to Illimythics, and the services will compete for the same user base, predominately the youth market.

Meanwhile, Orange France sold more than 73,000 Apple iPhones in Q407 and surpassed the 100,000 mark by end-January 2008. Orange said that 48 per cent of these customers were new to the network, while 82 per cent subscribed to a specific Orange iPhone plan that featured data bundles. The results helped the operator achieve its target of selling 50,000-100,000 units by year-end.

The iPhone sales represented almost six per cent of Orange’s handset sales within a month of its becoming available.

On February 27th, 2008, French regulator ARCEP modified the licences of Orange France and SFR to allow them to deploy UMTS technology in metropolitan France in the 900MHz band, which is currently used for GSM.

ARCEP also proposed that Bouygues Telecom reuse the 900MHz band for 3G. The operator says it will deploy UMTS in the 900MHz band by end-2009 and will request the modification of its licence, as the other operators have done.

3G coverage is now extensive in France according to ARCEP, but is comparatively low compared with levels in similar countries. SFR reports covering more than 70 per cent of the population, and Orange France should reach this degree of coverage by end-2008. By comparison, Vodafone UK covered 80 per cent of the population in March 2007, while O2 UK, which is regarded as a laggard in terms of WCDMA coverage, reached 76 per cent of the population by end-2007.

SFR and Orange France are required to cover 99.3 per cent and 98 per cent of the population, respectively, by August 21st, 2009. Bouygues Telecom’s 3G licence requires it to cover 75 per cent of the population by December 2010.

It is clear that France so far has low 3G adoption rates, and the usage of lower frequencies therefore appears to be indispensable to extend coverage further. The 900MHz spectrum can more easily cover wider areas and penetrate better inside buildings than frequencies in the 2.1GHz band in which 3G currently operates.

Network sharing will be allowed for UMTS900, as the regulator envisages using UMTS900 for sites deployed as part of the “white zones” programme. This is an initiative designed to use shared GSM networks to cover rural areas in order to provide full mobile access to the whole of France.

In its February 2008 decision, ARCEP said it believed these lower frequencies were essential to cover the territory with Internet access at the data rates above 10Mbps that are expected in the next decade, through the technologies that will follow 3G. Although LTE was not specifically named, the evolution of 3G networks is likely to expand into this lower-frequency band in the future.

As things slow down at home, it is only really Orange that has looked beyond the borders of France. Technically, SFR has an overseas presence in the form of an operation on the tiny French colony of Reunion in the Indian Ocean. Orange, though, has operations in 23 countries (mostly European and African) and controls operations or has joint control in five others. It would be fair to say the former France Telecom firm is a clear market leader in France, and that situation is unlikely to change in the short, near or indeed long term.