French mobile market set for more pain as Free heats up battle for customers

Wednesday 22 March 2017 | 08:37 CET | Market Commentary
The French mobile market looks set for more pain, after Free Mobile launched its latest challenge: unlimited 4G data. The latest research by Telecompaper shows that the French operators are trying to open up new competitive fronts, as revenues remain under pressure, and the number of Sims is hardly growing. Bigger data bundles and a growing number of content offers appear the latest strategies to win over customers. 

Number of Sims rising but revenues still falling

Total mobile service revenues in France fell by 1.3 percent in 2016 to EUR 16.9 billion, according to the latest update to Telecompaper’s French mobile operators’ database. While the number of Sims rose 2.4 percent to 76.5 million at year-end, a large share of that growth came from the expanding M2M market. The relative low value generated by M2M Sims is part of the reason why postpaid revenues dropped by 0.8 percent during 2016, even though postpaid subscribers rose by 4.4 percent during the same period. Prepaid meanwhile has shrunk to just 9 percent of Sims. Both prepaid Sims and revenues declined by 14.4 percent last year.  

All players gained postpaid customers in 2016, except for SFR. SFR did see a small increase in postpaid customers during the fourth quarter of 2016, just like it did in the fourth quarter of 2015. However, the decline in the first three quarters of 2016 was so large that overall SFR recorded a drop of 8.4 percent in its postpaid base in 2016. Bouygues Telecom saw the largest increase in postpaid customers in the market, growing by 10.9 percent.   

With Bouygues catching up in customer growth, Free Mobile has launched two new offers in the past week aimed at improving its flagship plan. The operator is now offering unlimited calls and texts all year round when roaming (within any of the eligible countries and to France), removing the previous restriction of up to 35 days per year. In addition, the amount of data roaming included has increased to 5 GB per month from 3 GB. To support its converged offer, customers who also take fixed broadband from Free will get unlimited LTE data in France going forward, for the same price. Customers without fixed see their mobile data allowance double to 100 GB a month, a level previously only seen in promotional offers in France. 

SFR and Orange meanwhile have been focusing on improving their content offers. SFR expects to see the benefits of this during 2017, when it targets a stabilisation of revenues after several years of decline. SFR has enlarged its potential customer base by offering SFR Play, its VoD service, to non SFR customers, and after signing new content deals with US studios last year, it also plans a new film channel. Its latest step is to open up a new revenue source from advertising, with the takeover of online video specialist Teads. Orange also opened up its OTT service to non-subscribers and launched a new bundled offer with Canal Plus

These efforts are so far showing mixed results for the operators. Compared to Q4 2015, Free and Bouygues gained mobile customers and increased their service revenues, while Orange increased its customer base but its mobile service revenues dropped by 4.6 percent from Q4 2015 to Q4 2016. SFR showed the worst results with declines in both its mobile base and service revenues. 

While all the players are offering more and more in their plans – whether it be data, roaming or video content –none has dared to increase headline prices. The focus is on reducing churn and locking customers in with multi-play plans, but it is unlikely much of this will lead to a real recovery in service revenues. In addition to the costs for the content deals, the French operators also face network investments for keeping up with the growth in data demand and the pending end to roaming charges, all of which are likely to keep both revenues and margins under pressure for some time to come.

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