Free Mobile jolts rivals with competitive pricing, forces 6% revenue decline for incumbents

Telecom Lead Europe: Free, France’s fourth mobile
operator that started its operation in January 2012 has posed competitive
pressure on its rivals. Strategy Analytics forecasts French mobile service
revenues to decline 6 percent in 2012, under the heightened competitive

The market analysis firm said that Free has posed
significant impact on market structures in Q1. Profit margins of the incumbent
operators are under threat and they have already started to adjust their
business models.

Incumbent operators will need to maintain their focus on
quad-play offers and low-cost SIM-only plans during 2012, in order to minimize
Free’s significant impact in this market. Free is clearly a trusted brand in
the French telecoms market and this launch has only enhanced its price-fighting
reputation with consumers,” said Phil Kendall, director of the Strategy
Analytics Wireless Operator Strategies service.

Offering significant discounts below prevailing French
mobile price points, Free has already gained an impressive 2.6 million mobile
customers and 4 percent market share in Q1.

By contrast, hoping that their own low-cost sub-brands
and quad-play bundles would fight off Free, companies Orange, SFR and Bouygues
Telecom all saw Q1 customer numbers and revenues decline.

Having already matched Free’s SIM-only propositions,
Orange, SFR and Bouygues will need to minimize any knock-on effect for their
more expensive postpaid plans. To protect margins this year, incumbent
operators must invest in newer IP infrastructure in order to reduce operating
costs and restructure handset subsidies,” said Sue Rudd, Director, Service
Provider Analysis.


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