Volatile French mobile market set for further pressure on service revenues

Thursday 15 June 2017 | 08:24 CET | Background
The French mobile market has been adding Sims for the last few years without fail, but mobile service revenues show a far more volatile picture, going up and down over the last few quarters. With the upcoming changes to roaming regulation and regulator Arcep proposing a further drop in MTR, we expect revenues to show more downs than ups in the coming quarters. 

Telecompaper’s latest research on the French mobile market shows that the number of Sims as reported by the operators rose to 77.6 million at the end of Q1 2017, an increase of 5.2 percent year-on-year. More postpaid Sims were added than prepaid Sims were lost, with prepaid’s share of the total market dropping to just 8 percent. Bouygues Telecom gained the most new customers in the past year, growing its total base by 10 percent. Free and Orange also added customers, but SFR experienced a drop of 1 percent. Orange remains the largest player, accounting for 40 percent of all Sims. 

In terms of service revenues, the picture is not so rosy. Total service revenues for the French mobile market have gone up and down over the last eight quarters. In Q1 2017, they came to EUR 4.18 billion, more or less stable (+0.3%) compared to the EUR 4.16 billion in the same period a year ago, but a drop of 2.5 percent compared to the previous quarter. Orange and SFR both lost revenues on an annual basis, while Bouygues and Free increased their service revenues. 

Outlook for service revenues remains rather bleak

The outlook for mobile service revenues is not very positive. In April, regulator Arcep proposed a further cut in mobile termination rates. The plan is for a moderate decrease, starting from EUR 0.0074 per minute in 2017 and falling to EUR 0.0072, 0.0070 and 0.0068 in 2018, 2019 and 2020 respectively. If the draft decision is confirmed, it will negatively impact mobile service revenues. The upcoming change to EU roaming regulation will also have a negative effect on service revenues.  

Prices for mobile plans have been going down in France for a number of years, although the decrease in 2016 was smaller than in previous years, according to Arcep’s 2016 annual report. Telecompaper’s annual analysis of mobile prices in Western Europe shows that indeed in France there were more plans in lower MAF ranges in Q1 2017 than a year earlier. The overall number of plans has gone down in France in the past year, notably in the EUR 60+ range, from 15 to ten, and in the EUR 40-49 range, from 11 to eight. 

 In addition to the reduction in monthly tariffs, the French operators continue to add more extras to their propositions in order to win over customers. Earlier this year all operators increased the number of GB in their bundles, following Free, which extended its top-tier tariff to unlimited data for its fixed customers and to 100GB for its mobile-only customers. They are also continue to add value-added services, such as media at Bouygues or sport at SFR. Giving customers more for the same price effectively constitutes a reduction in price.  

We don’t expect to see many more cuts in monthly tariffs, but do expect that the operators will continue to add extra services to entice customers to subscribe to their services. The costs of these services, combined with less roaming income and a possible reduction in MTR, means that mobile service revenues in France are more likely to show a downward trend than growth in the coming quarters.

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