Numericable-SFR, the face of the new French telecoms landscape with its convergence of cable and mobile, has reversed recent depressive trends in the country’s market and reported a second quarter net profit, of €79m, compared to year earlier loss of €116m.
Its parent company, Altice, said it thought business conditions were improving, even though it believed the “file is closed” on further consolidation. Altice recently failed to acquire Bouygues Telecom, in order to merge it with the SFR mobile operator it bought from Vivendi. This would have seen the second and third MNOs combined, together with Numericable, to create a powerful challenger to incumbent Orange. But Bouygues rejected the offer, which makes it likely that France will continue with four mobile operators for the foreseeable future.
Many observers, and most of the operators themselves, have been warning that four MNOs is too many in this mature market, but Numericable-SFR’s ability to turn a profit nonetheless highlights a Europe-wide trend – for mobile-only carriers to acquire wireline assets or partners, in order to support a quad play bundle, one of the only ways to increase revenues and generate scale in these saturated territories.
The competition in France has been cut-throat since Altice’s rival Iliad Group launched a mobile arm for its broadband provider Free, and used extensive WiFi-first and femtocell build-outs to achieve an entirely different cost base from those of the established trio of MNOs. That led to a price war and a string of financial losses and job reductions at the older firms. It also helped spark consolidation – Altice beat Bouygues to the SFR deal but Bouygues has since resisted other merger ideas, so that the number of MNOs has not been reduced.
Many European markets have seen a fall in the number of MNOs as competition rises and growth stagnates. Germany, the UK, Ireland and Austria are among the examples, but it seems that France, which had just three mobile carriers for so long, will now be stuck with four for some time.
That may spur some creative thinking among the operators. Numericable-SFR appears to be sacrificing market share for ARPU growth and profit, if its Q2 is anything to go by. It reported revenue of €2.8bn, which was down 2.4% year-on-year, but mobile postpaid ARPU was up by 0.4% to €26.1, and fixed ARPU by 3.8% to €35.3.
“The marketing strategy aimed at generating ARPU growth, generating value through a clear focus on high end customers and quadruple play is now bearing fruit in both fixed and mobile,” the company said in a statement. That could be a template for what most providers, from Vodafone downwards, are trying to achieve in Europe.
However, Numericable-SFR’s overall customer base fell, with mobile subscribers down to 21.9m from 23.1m a year earlier, and fixed subscribers down to 6.4m from 6.6m.
Altice completed its latest acquisition, of Portugal Telecom, on June 2.
The company’s report came a day after Orange also showed signs of an easing of the French competitive climate, reporting a year-on-year fall in domestic revenue of 0.8% – an improvement on 1.8% for the first quarter.
However, Orange now talks not in percentages, but in fractions of percentage points, – its half-year revenue was up 0.4% year-on-year, excluding the effect of regulator moves, which meant it was down 0.3%.
Total revenue was €19.6bn for the half year, with mobile up by 240,000 net additions. The fixed line business was also in slight recovery with broadband lines up by 322,000 in France, or about 3% on the year-ago quarter, while French pay-TV homes were upu 6% to 6.16m. Like many European operators, Orange is thinking more about video and broadband these days than even mobile as it gears up for new quad play battles.
Across Europe, taking in broadband and TV in countries like Spain and Poland, France Telecom/Orange has 16.2m broadband lines and just 966,000 fiber lines. It has 7.4m TV customers split between IPTV and satellite, up 758,000 over the year-ago figure. Orange has recently acquired Jazztel in Spain whose far larger figures will be included in one of the next two quarters.
Meanwhile Orange is spending more and its capex was up 6.5% over the same period last year. But by careful cost cutting the operator has managed to lift net income to €1.273bn, up €545m, while net income for the group was €1.099bn, almost double the €581m figure of H114.
France’s MVNOs are less sanguine about the survival of the four-operator system. In a recent interview with Les Echos, Jacques Bonifay, CEO of MVNE Transatel and president of Alternative Mobile, the association for some of France’s biggest MVNOs, said the market will not last long with four major players. Bonifay argued that a reduction to three MNOs would give alternative operators some breathing space, three years after Free Mobile’s disruptive entry. Following the takeover of Virgin Mobile France by Numericable-SFR, MVNO market share has dropped to 10.5%, from almost 13% in 2014.
French MVNOs often complain about the way they are treated by the network owners, calling for stricter wholesale price regulation, and for the right to offer new services, such as 4G, at the same time as the MNOs.