Industry Background
As in most other European markets, the telecommunications landscape in France is constantly changing. Ongoing M&A activity and the advent of convergence has meant that traditional boundaries between fixed, mobile, internet and multimedia players are slowly being eroded away to create a new communications paradigm.
French fixed and wireless operators face similar strategic challenges to those of their European counterparts - declining average revenue per user (ARPU) and increasing churn rates. Generating new, 'sticky' sources of revenue is therefore essential. Most operators are in the process of rolling out advanced technologies, such as FTTH and HSDPA, to help them establish communications as a complete package that caters to the ever-increasing demands of the 'communications consumer' - entertainment, information and community building to name but a few.
The French telecommunications market is characterised by its relative competitive immaturity vis-à-vis other large European markets. Despite the efforts of the French telecoms regulator (ARCEP), to shake things up, MVNOs are a very recent phenomenon and were resisted for a long time by the three MNOs, Orange, SFR and Bouygues Telecom. The triplet jointly claim over 95% market share of the French wireless market valued at €21.2 billion. In the fixed camp, the incumbent, France Telecom continues to enjoy an 80% share of a fixed market worth €22.8 billion in 2006. This is gradually being chipped away at by the altnets, Neuf Cegetel and Iliad (Free), primarily due to a particularly buoyant broadband market in France.
Subsectors
Fixed Telecommunications
A few key market trends to note that are specific to the French fixed telecoms arena:
1. Shift to integrated service offering
Fixed operators are rapidly repositioning themselves and reorganising operations to become fully integrated operators with a focus on broadband and mobility offerings. This shift was clearly manifested by France Telecom by the rebranding exercise it undertook in 2006, whereby all operations now fall under the brand name, Orange. Likewise the flurry of M&A activity undertaken by the major altnet in France, Neuf Cegetel, has meant that the incumbent has a battle on its hands for control of the broadband market. Neuf Cegetel has acquired the subscriber bases of AOL France and Club Internet over the past 18 months, taking its broadband subscriber base to over 3 million at the end of Q2 2007.
2. Triple play and convergence are hot topics
France was one of the first European markets to develop a competitive triple play offering and is now one of the most mature markets for this and more recently, quadruple play with Orange's Unik and SFR's Happy Zone. Fixed-mobile convergence features heavily in France Telecom's strategy for the coming years. In addition to Unik, a number of services have already been launched by the incumbent which combine fixed and mobile services (Business Everywhere, FamilyTalk, Mes Services Person etc). Interestingly, SFR has recently made a move into the fixed market by acquiring Tele2 which has meant inheriting a fixed telephony subscriber base and a healthy ADSL customer base too. All of the fixed operators have IPTV offerings through their various 'boxes' as they are known in the French market and are improving their triple play and multimedia offers constantly. Free is the leader in terms of innovation in the triple play space and reported 2.5 million customers as of March 2007. The Freebox allows its users to watch pay TV via a deal with CANAL+, supports HDTV, includes voice over WiFi and offers the Freeplayer application allowing users to interconnect TV, HiFi and PC for multimedia purposes.
3. DSL to fibre
France Telecom, Iliad and Neuf Cegetel are switching their attention from DSL and are currently all frantically building out fibre networks to both business and residential markets to support the hungrier multimedia applications of the future. The regulator is concerned about duplication of resources and is eager to ensure France Telecom does not assert an access monopoly (as it did with DSL in the past). Another issue niggling at the French government with the race to roll out fibre is the fact that the operators have logically concentrated on roll out to densely populated areas. This goes against the government's ambitions to legislate against the 'digital divide'. It is therefore hinted that France could be a test case for next generation access regulation, which the German market is likely to be watching with interest.
4. Digital divide versus Broadband for Everyone
As alluded to in the previous paragraph, the government in France is a constant force in the market when it comes to access to telecommunications services. In 2003, the government announced their 'Broadband for Everyone' plan which aimed to have 10 million subscribers to broadband by 2007. This target was achieved in 2006 broadly through a program of state funded subsidies and ensuring networks are opened to competition.
Top
Mobile Telecommunications
A few key market trends to note that are specific to the French mobile telecoms arena:
1. Low penetration
France has one of the highest proportions of mobile contract subscribers (67%) and the lowest penetration rate in Western Europe (81%).
2. MVNO shake-up
MVNOs accounted for the majority of net additions (90%) in Q1 2007 despite an overall minimal market share (3.4%). The arrival of MVNOs on to the scene in France though is a sign that the mobile market is starting to open up after a long period of oligopolistic behaviour including price fixing allegations. A number of the MVNOs have targeted niche markets with very tailored offers for targeted segments which has been a welcome change for a section of the subscriber base in France. No doubt the continuing apparition of MVNOs on to the French market will keep the MNOs on their toes and encourage livelier, more customer centric activity.
3. 3G on the up but usage of multimedia services remains a challenge
3G has gone from strength to strength in France with 160% year on year growth since 3G was launched by Orange and SFR in 2004. Despite this very successful take up of 3G enabled mobiles, it seems increasing ARPU is still a real challenge faced by all of the wireless operators. The multimedia portals of the three MNOs - Orange World, SFR's Vodafone live! and Bouygues' i-mode have seen the proportion of active subscribers suing multimedia services increase by only 0.7% from Q1 2006 to Q1 2007. Only 30% of users actually use multimedia services.
4. Fixed mobile convergence is a reality
Both Orange and SFR offer FMC services (Unik and Happy Zone respectively) which have been successful in the French consumer market. Bouygues has not yet launched a converged offering for this market segment but has joined the other two MNOs in offering FMC services for the enterprise segment, taking advantage of the continuing mobile centric trend in French businesses.