Free Mobile's impact--we should have seen it coming

Tools


The upheaval that Iliad's Free Mobile continues to cause within the French mobile operators' business is both remarkable and instructive.

First, why didn't the other French operators realise that Iliad CEO Xavier Niel, after signalling a warning that he was about to do something different, was going to basically rip the heart out of existing price plans?

While the operators assured everyone they were well prepared for this upstart that knew nothing about the complexities of the mobile business, the result has been widespread mayhem.

It has become blatantly apparent that the major operators were not prepared for such a low-cost assault by Free Mobile on their comfortable margins, and customers have signed up in their millions. The latest estimate is that Free Mobile has recruited 3 million subscribers since it launched a few weeks ago.

This remarkable success has triggered bitter infighting, with SFR and Bouygues Telecom raging at France Telecom Orange for signing a network roaming deal with Free Mobile, while MVNOs are mounting a political campaign, claiming that Free Mobile's wholesale rates are nothing short of scandalous.

The model adopted by Free Mobile is interesting in that it's part MNO (mobile network operator) and part MVNO. While its own 3G network has been criticised by the opposition, probably fairly, as offering poor and unreliable coverage, it has managed to retain this initial surge of customers looking for a SIM-only deal that knocks spots of the price plans offered by existing operators. 

While it will be interesting to watch whether Free Mobile has the customer support capabilities to stop these early adopters from churning, there is no way back for the French mobile market. The high-price model that French operators have managed to retain is broken and gone for ever. Prices will plummet to offer competition to Free Mobile, dealer commissions will fall and handset subsidies will collapse or disappear.

Whether Free Mobile becomes a long-term success is irrelevant. The French market has undergone irreversible change and we should expect to see the ramifications of this shudder through the operator business for this year and beyond.--Paul