France Telecoms

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  • July 26, 2018

    The drive for convergence: a value-destructive strategy

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    Many European telecoms operators are pursuing a fixed/mobile convergence strategy on the pretext that the addition of mobile reduces churn. We see no evidence of churn reduction from this strategy. Discounts required to encourage take-up of fixed/mobile services are often value-destructive, even before competitor reaction: a 10% bundle discount necessitates a 2ppt improvement in churn to wash its face economically. M&A premia on the basis of convergence synergies raise the hurdle even higher. Most UK operators offer very limited discounts on fixed/mobile bundles for now, sensibly focusing on enhanced services. Vodafone is the most aggressive, albeit less so than it is elsewhere. All UK players should hope that it stays this way.
  • May 15, 2018

    Covert growth in UK mobile

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    The UK mobile market is growing strongly – we estimate revenues by 5% and EBITDA by 8% in 2017 – excluding one-off regulatory drags and the loss of non-profit-generating handset revenue. Regulatory price cuts end in mid-2018, and the handset effect will disappear from all reported figures from April 2018, leaving scope for very positive headline growth next year – considerably better than its European comparators and the sluggish UK fixed market. The outlook for the UK mobile industry is the best it has been in a decade, with significant growth in data demand, price increases, some supply constraints, rational competition, and major regulatory drags rapidly fading.          
  • UK mobile market Q4 2016 – Nearly back to growth
    UK mobile market Q4 2016 – Nearly back to growth
    December 18, 2017

    European mobile in Q3 2017: Still growing (just)

    European mobile service revenue growth declined this quarter to 0.3%, likely due in large part to the increased negative impact from the European roaming surcharge cuts, which we estimate at around 0.5-1.0ppts for Europe as a whole. The continued growth was supported by continued ‘more-for-more’ price increases coupled with strong data volume growth. Partially countering this, there has been a step up in competition at the low end in some markets, often driven by the smaller operators. Looking forward, the negative EU roaming impact is likely to decline from next quarter given the end of the summer holiday season, and on balance we would expect positive price increase trends to overcome negative low end competitive trends, at least in the short term. This might change in 2018, as Iliad launches in Italy, and recently consolidated operators become more of a threat.    
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  • June 29, 2017

    European mobile in Q1 2017: Stuck at zero

    European mobile service revenue growth remained stuck at zero in Q1, with a heightened impact from the mobile termination rate cuts in Germany and price promotional activity in southern Europe mitigating improving markets in the UK and France.‘More-for-more’ price rises continued both during the quarter and after, and appear to be more widespread than the 2016 increases. This should be driving revenue growth at a healthier rate than zero, and may well do as out-of-bundle revenue declines fade away in significance and regulated MTR and roaming cuts annualise out. The regulatory impact should improve next quarter, as the UK MTR impact drops, Germany at least gets no worse, and the roaming impact has a lull prior to the ‘free roaming’ mandate taking effect towards the end of the quarter. From Q3, however, the ‘free roaming’ effect will be in full force, and will negatively impact operators in northern European and smaller European countries in particular

  • European mobile in Q4 2016
    European mobile in Q4 2016
    April 19, 2017

    European mobile in Q4 2016

    European mobile service revenue growth was unchanged in Q4 on the previous quarter at -0.1%, tantalisingly close to growth but just held back by renewed mobile termination rate cuts in Germany. ‘More-for-more’ tariff changes are becoming increasingly commonplace, as operators increase data bundle sizes to allow for volume demand growth, but nudge up pricing as partial compensation. This has not yet translated into positive revenue growth across Europe as a whole, but increasingly looks like it will do, with a number of moves made in early 2017.
  • April 12, 2016

    European mobile in Q4 2015 – The challengers’ challenge

    European mobile service revenue growth was flat at -0.8%, while underlying country movements were somewhat more dramatic. The key highlights were Italy returning to positive growth driven by pricing stability, and France showing worsening growth decline for the first time in over two years impacted by challenger telco pricing cuts. An assessment of these challenger telcos highlights a somewhat precarious position, as continued price aggression yields diminishing incremental gains, and they all remain some way from gaining the scale to achieve profitability. The only incentive for challengers to remain aggressive is as an encouragement for their competitors to buy them; increasing regulatory hurdles to consolidation would remove even this incentive, leaving price increases as their only rational route to profitability.
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    October 14, 2015

    European mobile in Q2 2015

    European mobile service revenue growth improved to the highest in over four years driven by improvements in the three slowest growing markets of late. Out-of-bundle revenues are still declining at a rate of over 10% but data revenue growth trends point to underlying strengths in the revenue profile. Looking at the longer term picture begs the question as to whether the quarter’s improvement can be repeated over the next 18 months, transforming the industry into one with extremely healthy revenue growth of 5%-10%; on balance we are not very optimistic. Two major in-mobile transactions are yet to be approved by the EC, namely H3G/O2 in the UK and an H3G/Wind JV in Italy. The recent precedent from Denmark is somewhat discouraging, although the Danish consolidation was unusual in some respects. Nonetheless comments from the new competition commissioner Margrethe Vestager suggest that regulatory caution towards 4-to-3 mergers is still high. Progress towards convergence is continuing with few operators in a post-consolidation world being either 100% fixed or 100% mobile. Convergence has to date been discount-led and damaging to market revenues, but post-consolidation, operator rhetoric has been reassuringly more focused on intentions for increased investment in both LTE mobile networks and high speed fixed networks.

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    September 25, 2014

    European mobile in Q2 2014: Underlying weakens again

    European mobile service revenue growth improved by 0.5ppts to -7.2% in Q2 2014, but all of this and more was driven by a reduced regulatory impact; underlying growth has been stuck at around 6% for the last four quarters, with progress in some areas consistently being countered by further pricing pressure. Industry consolidation has progressed to some extent, but would have had little impact in the quarter. Further in-country mobile/mobile mergers are more than likely but uncertainty driven by the changing European Commission may be delaying decisions to move forward. The UK example shows that consolidation is not necessary for market repair, but in the present environment the smaller operators in continental Europe have every incentive to be as disruptive as possible to encourage their acquisition, so further mergers cannot come soon enough.

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    March 24, 2014

    European mobile in Q4 2013: Focused on consolidation

    European mobile service revenue growth again disappointed in Q4, dropping slightly from -8.9% to -9.1%, with underlying revenue growth dropping a little further from -6.0% to -6.3%, again reaching a record low. There had been hopes that improved GDP growth would drive a volume rebound, that price declines would start to annualise out, and that declining out-of-bundle usage would wane in its impact as this usage declined. In the event, ongoing price competition from smaller operators, MVNOs and quad play offerings, combined with surging use of OTT communications platforms, have dominated trends. In the medium term, the development of 4G and Vodafone's Project Spring may bring some much needed network differentiation back to the market, allowing pricing power to return to the larger operators. However, it will be 2015-2016 before these factors come into play: in the short term, the main source of optimism is consolidation.

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    June 4, 2013

    European mobile revenue growth and outlook Q1 2013: Hitting a nad [...]

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    May 10, 2012

    Numericable: beyond deleveraging

    France's sole cable operator, the smallest of the country's five broadband providers, is sub-scale on the retail market and the heavy cost of servicing its debt leaves only meagre resources to leverage its superior network commercially. However, thanks to its white label deal with Bouygues, Numericable has resumed revenue growth and should achieve its 2014 debt/EBITDA target. As France Télécom's network upgrade to fibre progresses, the main upside for Numericable lies in a closer alliance with Bouygues and possibly other DSL providers.
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    March 19, 2012

    Mobile revenue growth and outlook Q4 2011: from bad to worse

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request.
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    March 19, 2012

    Themes from Mobile World Congress

    Mobile operators, services and handset makers are diverging – they all come to the MWC but have increasingly little to say to each other as their businesses move in very different directions. In the context of -5% European mobile revenue growth, the MNOs at the MWC were a sober bunch, focusing on industrial services, defensive moves around messaging, and a (not unreasonable) plea to regulators for some relief. As competition in Android intensifies between hundreds of black plastic rectangles, the picture for OEMs looks tough but Google's failure to make Android work well for developers may also start to bite, leaving an opening for Nokia and Windows Phone.
  • February 22, 2012

    Launch of Free Mobile

    The launch of the fourth mobile network operator in France has so far met with dramatic success, gaining around 1.5 million subscribers in the first month, driven by rock-bottom pricing and a clever mass media PR campaign. Its tariffs are, however, so low that it is very hard to see how they are sustainable in the longer term. In the short term, Free's economics are boosted by asymmetric voice and text termination rates that result in other operators' customers effectively subsidising Free subscribers by €5 to €10 a month. This arbitrage is very likely to disappear over the next two years, but Free Mobile can increase its prices when this occurs. Its challenge will be to acquire a critical mass of subscribers before this point, and to retain them thereafter.
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    November 24, 2011

    Mobile revenue growth and outlook Q3 2011: The outlook bleakens

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    August 15, 2011

    Mobile revenue growth and outlook Q2 2011: MTR cuts hit but stabl [...]

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete. A copy of the underlying data in spreadsheet format is available to our subscription clients on request

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    May 25, 2011

    Mobile revenue growth and outlook Q1 2011

    In this presentation we show our analysis of revenue growth trends for mobile operators in the top five European markets (UK, Germany, France, Italy and Spain). The historical analysis is based on the published results of the operators, although they include our estimates where their data is inconsistent or not complete.

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    March 9, 2011

    Mobile revenue growth and outlook Q4 2010: Growth improves, but o [...]

    European mobile revenue growth improved very slightly in Q4 2010, up by 0.1ppt in reported and 0.2ppts in underlying terms, but remained negative. While the improvement is welcome, growth remains very subdued compared to pre-recession levels, especially in Italy and Spain, which continue to lag the growth of the UK, Germany and France. The outlook for mobile revenue growth is bleak, with severe MTR cuts in Germany and the UK likely to drive growth down again over the next six months.

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    January 24, 2011

    French fixed line retail upheaval

    French ISPs are about to enter a disruptive four month window of penalty-free broadband subscriber churn, triggered by the VAT rise on IPTV. SFR has followed Iliad's Free by offering unmetered fixed-to-mobile calls at the risk of ARPU decline. We expect Free's market share to stabilise, whilst those of SFR and Bouygues should rise to the detriment of Orange.
  • Orange
    Orange
    July 7, 2010

    Orange sets exit strategy from premium TV

    FT has put majority stakes in Orange Sport and Orange Cinéma Séries on the block, and claims to have held discussions with News Corp. We think it unlikely that an investor would be interested in entering the French pay-TV market, dominated by Vivendi's Canal+. We believe FT could find a buyer for Orange Sport in Disney's ESPN, which could prove viable if a cross-retailing deal is reached with Canal+. A Eurosport merger is another option. Orange Cinéma Séries could be viable under a new owner, if it widens it distribution to other platforms. Now officially on the way out of the pay-TV production business, a welcome decision in our view, Orange can focus on improving the consumer value of the basic TV offering on the triple play marketplace.
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  • France Télécom
    France Télécom
    May 4, 2010

    France Télécom in a Red Queen race

    FT's domestic fixed line revenue decline accelerated in Q1 2010 as Orange's broadband subscriber growth continued to disappoint, despite price cuts. FT's higher service level has sustained premium pricing to date, but competitor altnets are also improving service – FT must run to stay still in a fast moving competitive marketplace. New promotions and/or price cuts for the triple play are required to stabilise Orange's broadband market share, at the cost of further fixed line revenue decrease.
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    March 8, 2010

    French fixed line 2009 corporate results

    Despite the recession, in 2009 the French broadband market added 1.8 million connections to reach 19.6 million, but we expect the deceleration in growth to persist in 2010. Orange's leading position weakened further in Q4 2009, despite retail price cuts, and we expect a further decline in market share in 2010, impacting FT's top-line. SFR was the star performer of 2009, although its Ebitda margin has improved slightly. Iliad remains the ‘best in class' in terms of profitability, but must address high churn at Alice. Bouygues' fixed line début was an impressive splash – at a cost.
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    January 28, 2010

    Orange possible U-turn on pay-TV and Canal+

    France Télécom's forthcoming Chief Executive Officer, Stéphane Richard, is considering a radical shake up and potential U-turn of Orange's TV ‘content' strategy, initiated and driven by CEO Didier Lombard. Orange could withdraw entirely from supplying premium pay-TV channels (sports and film) and distribute only third party content, as has been the focus of other broadband suppliers. A retreat of Orange from TV content would enable a more active cooperation with the Canal+ Group, benefiting both partners, who have largely overlapping subscriber bases.
  • Orange
    Orange
    December 11, 2009

    Orange TV premium content strategy

    France Télécom's Orange TV premium strategy presents an interesting example of diversification into low cost ‘light' pay-TV offers by an incumbent telecoms operator. Orange Sport and Orange Cinéma Séries are offered exclusively to Orange's 2.55 million TV subscribers, and five quarters after launch, adoption is 20%. This report draws several lessons on this type of venture for other incumbent operators.