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.
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
Iliad accelerated fixed line subscriber recruitment in 2011 thanks to a substantial increase in capital expenditure on its Révolution box, shrinking its cash flow margin
Iliad’s margin should recover somewhat in 2012 thanks to decreasing box prices. Fibre deployment is being scaled back due to weak demand
Mobile operating losses may be modest this year, but we expect pressure will build up in 2013 as network running costs rise and the termination rate asymmetry drops out
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
Qatar’s Al Jazeera will launch its French pay-TV channel by this summer, showing weekly Ligue 1 and Champions League games, but it has yet to disclose a business plan and distribution deals
The new channel is a complement to Canal+, which broadcasts the most attractive games. Al Jazeera would need to obtain distribution on the Canal+ platform
Even if such a deal were to be struck, Al Jazeera would struggle to break even
To draw in competitors to Canal+, French football Ligue 1 broadcasting rights are being tendered in 12 lots, offered in three sequential auctions (non-premium Fans matches, Premium, highlights)
Iliad is getting ever closer to securing the French 4th 3G licence on terms with which it is happy, with progress slow but seemingly inevitable, and a licence award likely in H2 2008 followed by service launch in 2010
This report presents our analysis of Neuf Cegetel alongside that of close rival Iliad (which trades under the Free brand). Neuf and Iliad are France’s two leading unbundlers, are both quoted on the Euronext exchange and, since Neuf’s IPO in November 2006, have been assessed largely in parallel by investors. We anticipate Neuf's Investor Day on 12th September will provide analysts with greater detail on Neuf’s strategy to improve by 2010 its profitability to the level enjoyed by Iliad.
Canal+ targeted subscription (as opposed to subscriber) growth of 1.3 million by 2010 has a lot of stretch in view of the intense competition from free-to-air (FTA) services and in particular digital terrestrial TV
Iliad’s 2006 results were solid with broadband subscriber growth on target, DSL market share up one point to 19%, ARPU up 7% to €34.5/month and churn (enviably) at just below 1% per month. Over 1 million of Iliad’s subscribers have dropped France Télécom line rental and Iliad now completely owns those fixed-line telecoms customer relationships