When we mention disruptive French operator Free to the global cellular community, the first thing rivals do is to say that yes, it stole a few million accounts, but the quality was so bad that those customers are now returning to their old suppliers. Quite clearly that is wishful thinking and the latest numbers out for Free show customers up by 640,000 ‘ the sort of number usually associated with one of the US giant cellcos – to a total of 7.44m subscribers.
The rise of the Free cellular operation is not a one-off that is fading. It has now had the highest customer growth in France for each of the last seven quarters and controls 11% of the cellular market, from a standing start just two years ago, when it was awarded its first mobile licence.
While investors immediately realized that the third quarter had shown slower growth than in prior periods (it was 720,000 in the second quarter), and this took some sheen off the stock, it still shows that a strategy of mostly Wi-Fi offloaded content can be bent to make an attractive consumer offering, for far less investment by the carrier. Free said that its continued customer wins were down to its new strategy of offering plans at €2 a month, which it has been doing for all of 2013. This low rate is a SIM-only deal with no long term contract.
Free said that despite an end to lower termination rates, it grew mobile service revenues 35.6% €292.1m.. Including equipment sales of €22.9m mobile now accounts for around one-third of revenue for its parent, the Iliad Group.
Meanwhile it continues to grow its fixed line subscriber base with a combination of ADSL, VDSL and fiber. It saw a 7.3% rise in revenues in fixed broadband for the quarter to €625.5m in Q3 and added net new 62,000 fixed broadband customers, taking it to 5.6m, with broadband ARPU up to €36.1, due to uptake of its higher priced Freebox Revolution box. Total revenues for the Iliad group were up 15.3% from last year to €944.2m.
Customers who have the Revolution can have the first mobile customer for free instead of for €2 a month, and this offers 120 minutes of voice calls each month in France, unlimited SMS and services such as voice mail, caller display and usage monitoring ‘ and no contract tie in. The more advanced deal costs €20 a month and has unlimited voice, SMS and 3GB of Internet and unlimited access to the FreeWi-Fi network, which is made up of five million homespots.
Slowly Free’s costs associated with its mobile network are going up. Initially it had asymmetric call termination rates, to help it get started and these are coming to an end with the other operators, and it also pays France Telecom a huge fee for roaming fees, which will run out in 2017, by which time Free will have had to have built out more of its own network, or it may find that the deal is tough to renegotiate.