Confident Free Mobile to step up network spending

Bolstered by what it claims to have been a very successful start to its mobile campaign in France, Iliad is set to ramp up spending on the mobile network of its Free Mobile brand with around €250 million planned for this year.

According to the Financial Times, the company said it is responding to a "campaign of denigration" by the country's incumbent mobile operators over its ultra-low cost service, which has caused mass defections by mobile users to Free's service.

It's not yet clear how many customers have switched to Free Mobile: Reuters reported that Iliad said it would provide figures with its first-quarter results in May. Estimates currently range from 800,000 to 2 million subscribers.

"I do not think a new mobile operator anywhere in the world has ever taken on so many subscribers so quickly," Iliad founder Xavier Niel said at a press conference, Reuters reported.

Iliad hopes the new spending plan will silence criticisms that Free Mobile's network coverage is poor and far too reliant on the roaming agreement with France Telecom Orange. Indeed, around 90 per cent of the company's traffic is still carried by the Orange network. Recently, the owner of SFR, Vivendi CEO Jean-Bernard Lévy, criticised Orange for providing Free Mobile with favourable network sharing terms. However, French regulator Arcep recently confirmed that Free Mobile is fulfilling its obligations to cover at least 27 per cent of France.

Reuters reported Niel said that Iliad had installed 1,700 antennas already, with some 1,000 activated, and aims to have 2,500 antennas by the end of the year. Niel admitted that Free Mobile only has around 10 antennas in Paris and needs around 300 for good coverage.

Coverage issues aside, there is no doubt that Free Mobile has made a deep and lasting impact on the French mobile market, and has forced the large incumbent operators to respond by slashing the prices of their own mobile plans, primarily those plans marketed by secondary brands such as Orange's Sosh.

Orange lost 201,000 customers on a net basis from early January to mid February, with about 40 per cent going to Free, according to Reuters. SFR said it lost 208,000 subscribers in the first two months of 2012, while Bouygues Telecom lost 159,000 subscribers by February 15.

Iliad itself has seen its profits hit by the extra mobile network spend: the company's net profit fell by 20 per cent in 2011 to €252 million, while revenue grew by 4.1 percent to €2.12 billion.

For more:
- see this Reuters article
- see this FT article (reg. req.)
- see this Wall Street Journal article (sub. req.)
- see this separate Reuters article

Related articles:
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FT Orange loses 200K subscribers to Free Mobile--in 6 weeks
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Free Mobile's impact-we should have seen it coming