Free Mobile sneaks in smartphone subsidy test

It's the step that France's incumbent operators have been dreading: enfant terrible Free Mobile is testing the sale of a mobile plan including subsidised smartphones in a move that could cause further headaches for rivals if the operator decides to take similar offers to the masses.

Smartphone subsidies represent one of the last bastions for the Iliad-owned mobile operator, which has already caused huge disruptions on the French mobile services market. Since Free Mobile launched its €19.99 plan in January 2012, Orange France, Bouygues Telecom and Vivendi-owned SFR have been forced to find new ways to compete, including setting up their own low-cost subsidiaries such as Orange's Sosh and Bouygues Telecom's B&YOU.

Free Mobile has since launched a €2 plan for mobile calls, and is already dipping its toes into multi-service bundling by offering mobile discounts to ADSL subscribers. Subsidies are the latest attack on its rivals' offerings.

Nevertheless, you won't find smartphone subsidies on Free's web site – at least not yet. The operator has instead chosen to commercialise the plan via for a limited period in an attempt to test the subsidy route.

As a report in Les Echos notes, the first attempt by Free is limited to three days, but it is possible that the offer will be extended. All depends on its success.

In detail, the €39.99 "Forfait Mobile Free" plan for 24 months is offered between 9 and 11 July and provides a hefty 6 gigabytes of data, FreeWiFi, unlimited fixed calls to 80 destinations across the world, unlimited mobile calls to 11 destinations, and unlimited SMS and MMS in France. A €4 discount is also offered to Freebox users.

The smartphones on offer are Apple iPhone 4 for €1, Apple iPhone 5 for €199, Google Nexus 4 for €1, Samsung Galaxy Note 2 for €69, and the Samsung Galaxy S4 for €179. All are subject to being in stock, and already the iPhone 4 is no longer available, for example.

Although Les Echos notes that the plans are about 15 per cent cheaper than those of Orange, Bouygues and SFR when comparing 2 GB plans, Free is not doing anything new here. "It is not an outstanding offer," Henri Tcheng, an analyst at BearingPoint, told Les Echos. "In fact, Free is only dividing the iPhone subsidy by 24 and adding the €19.99 per month that corresponds to its existing plan."

Nevertheless, the fact remains that Iliad founder Xavier Niel, who has made no secret of his huge ambitions for France's mobile market, has launched a new offensive on the most profitable deals of rival players.

If the deals become more wide spread, "these subsidised offers of Free Mobile could encourage players to intensify efforts to subsidise, typically on packages for €39.90 euros," Alexander Iatrides, an analyst at Oddo Securities, told Les Echos.

France's battle-scarred operators really do not need this.

For more:
- see this Les Echos article (translated by Google Translate)

Related Articles:
French price war drives mobile usage to new heights
Vivendi's SFR and Bouygues hit by mobile price war as Iliad blossoms
France Telecom wants to copy Verizon Wireless/Comcast deal
French operators get approval to share networks, but with conditions
France Telecom becomes 'Orange,' as Free Mobile launches fresh assault
SFR CEO: Mobile pricing nears danger level; but goes ahead with price cuts