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

Enders Analysis co-hosted its annual conference, in conjunction with BNP Paribas and Deloitte, in London on 19 January 2012. The event featured talks by 13 of the most influential figures in media and telecoms, and was chaired by Sir Peter Bazalgette. An edited transcript of notes taken during the speaker presentations follows.

The speakers were Sir Martin Sorrell (CEO, WPP), Glen Moreno (Chairman, Pearson), Martin Morgan (CEO, DMGT), David Levin (CEO, UBM), Dan Cobley (MD, Google UK & Ireland), Mike Pocock (CEO, Yell), Vittorio Colao (CEO, Vodafone), Charles Dunstone (Chairman, Carphone Warehouse, TalkTalk Group), Stephen Carter (President, Alcatel-Lucent EMEA), the Rt. Hon. Jeremy Hunt MP (Secretary of State for Culture, Olympics, Media and Sport), Neil Berkett (CEO, Virgin Media), Liv Garfield (CEO, Openreach) and Ed Richards (CEO, Ofcom).

Carphone Warehouse’s Q3 2011/12 volume and revenue was severely hit by a steep reduction in UK prepay volumes, with prepay subsidy cuts driving a drop in the UK market of as much as 40%

However, stronger volumes of higher margin contract handsets drove a small improvement in gross profit for the quarter

The unexpected prepay weakness means that Carphone Warehouse’s handset business will have roughly flat operating profit in its 2011/12 financial year at best, although given the negative external factors this would reflect a strong underlying performance

Under regulatory pressure, France Télécom introduced in July 2006 a wholesale ‘naked’ DSL offer, under which broadband alone is supplied to the customer, as the lower frequency portion of the line used for PSTN telephony is deactivated

Vodafone UK’s new broadband product is not very competitively priced compared to the offers from Carphone Warehouse and Orange, costing £5-10 a month more than the nearest equivalent packages

In a fit of pique over increasing subsidies, Vodafone UK is dropping Carphone Warehouse (CPW) as a distributor, and moving exclusively to Phones4U with lower subsidy levels and volume guarantees, while Orange is reportedly also considering its position with CPW

The Carphone Warehouse (CPW)’s £370 million acquisition of AOL UK’s internet access business is set to quadruple the size of CPW’s UK broadband customer base, enabling it to become the third largest player in the market after NTL and BT, with approximately 2 million broadband subscribers

Orange’s new ‘free broadband’ offer brings savings of up to 60% for Orange UK customers who pay for broadband, and may appeal to a great many of them 

Carphone Warehouse (CPW) has launched a broadband/telephony bundle which effectively offers free broadband to non-cable customers in urban areas 

O2’s purchase of Be may only have cost £50 million but its entry into UK broadband may ultimately prove an expensive distraction