France Telecom (FT) CEO Stephane Richard said that the company's average revenue per user for its customers in France will decline at a faster rate this year than in 2012. Richard, speaking to Radio Classique, painted a gloomy picture for orange France and said ARPU is expected to fall between 12 per cent and 13 per cent this year after falling 10 per cent in 2012.
Richard blamed the sharp drop on the entry of Iliad's Free Mobile, which offers subscription rates starting at €2 per month. Free's disruption was part of the reason FT lost around 600,000 customers in the first six months of 2012, but Richard said the company lured back just as many in the second half of last year with lower prices, according to Dow Jones Newswires.
While Richard said it is too early to make a definitive assessment of Free Mobile's impact on French mobile market, he said the result has been that other mobile operators had lost around €2 billion in investment resources.
"The goal for [Free Mobile] was to lower prices and improve the purchasing power of the consumer," Richard said, according to Le Expansion. "However, we have posed the question of the effect [of Free Mobile] on the industry, on employment, innovation, investment, and the ability of France to develop a high-speed broadband infrastructure."
Despite this poor outlook, Morgan Stanley has upgraded FT stock from "underweight" to "overweight."
The company has been attracting more positive ratings due to higher operating and profit margins, stronger ROE and a dividend yield of 9.97 per cent, according to Seeking Alpha.
However, on the downside, Free Mobile's entry has forced FT to lower its pricing to compete, with analyst firm MorningStar expecting FT's revenues to decline continuously throughout 2013 as its existing contract base migrates into lower-priced plans. However, despite the increased competition, MorningStar believes the stock remains undervalued.
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