Battle-scarred France Telecom sees salvation in LTE

France Telecom is putting its hopes into new LTE services as the fixed and mobile operator continues to suffer from the ongoing cutthroat competition in its home mobile market.


More than a year after upstart operator Free Mobile launched an aggressive smartphone plan that shook France's mobile market to the core, CFO Gervais Pellissier still thinks the price war in France's mobile market is "ferocious," Reuters reported.

This was reflected in the operator's first-quarter results as FT reported that group revenue was down 5.9 per cent from a year earlier at €10.28 billion, largely due to a 6.2 per cent decline in revenue at the French mobile unit. EBITDA fell 9 per cent to €3.12 billion. Average revenue per user in France fell 10.7 per cent to €26.92 a month.

Now, the former incumbent is banking on new high-speed LTE services to revive its fortunes. "In the coming months we will be able to test the appetite consumers have for 4G mobile services, and we hope this will allow us to recreate value," Reuters reported Pellissier as saying.

Under its Orange brand, the operator has been rolling out commercial LTE services across France since the end of 2012, and is now offering the services in 15 urban areas, with a target to cover 30 per cent of the country by the end of the year. The company also recently revised its "Origami" price plans to include LTE options.

Both SFR and Bouygues Telecom are also offering or planning to offer LTE services. Iliad's Free Mobile has not yet entered the LTE race, but its latest threat is that it may consider offering subsidised smartphones to win more customers, Reuters reported.

The Wall Street Journal quoted Pellissier as saying that France Telecom eventually hopes to hopes to charge between €5 and €10 per month extra for LTE on mobile plans between €30 and €50 per month, while bundling it into more expensive plans above €50.

Meanwhile, Standard & Poor's earlier this week cut France Telecom's credit rating by one step to BBB+, cited pricing pressure in the French mobile market and bigger-than-anticipated earnings decline this year, according to Bloomberg. The operator is facing pressure to cut costs further, and said that will also be a key focus this year.

For more:
- see this release
- see this Reuters article
- see this Bloomberg article
- see this WSJ article (sub. req.)
- see this separate Bloomberg article

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