FT holds onto customers at home with triple play

At home, France Telecom’s Q1 2009 figures show it continued to retain customers in all its areas of products and services. Its biggest challenge is shoring up declining ARPU. The 2012 Vision revealed in the last results presentation remains the goal to strive for.

France Telecom’s home market is the largest revenue contributor. While it has continued to lose subscribers in its fixed telephony services, it has also seen an accelerated improvement in triple play uptake.

We believe this is in line with its shift towards a multi-screen strategy, where TV or media content is now used as a key differentiator to retain and attract new customers.  Based on an initial analysis amongst its peers we believe that France Telecom’s multiple-platform TV strategy has helped to position it as a multi-play market leader.

TV is the key

Orange TV in 1Q 2009 reinforced the trend observed in 2H 2008 where the use of TV helped to attract new customers to France Telecom’s bundles and mobile subscription.

In 1Q 2009, IPTV customers made up 25% of France Telecom’s retail ADSL subscribers, an increase from 10% in 2006 and 16% in 2007.  More importantly, Orange TV also enabled France Telecom to gain a foothold in the pay TV market.  It gained a 13% market share at the end of 2008, a respectable proportion when compared against Telefonica’s 14% in 2008 and DT’s 1%.     

The use of TV was also a big driver for the mobile market in France. The introduction of Orange TV for mobile helped generate additional revenue and to keep top tier customers happy with high end bundles.  

Based on 1Q 2009 operational key performance indicators, post-paid subscribers increased from the end of 2008 to 17 million; prepaid customers declined to under 8 million. In addition, blended ARPU continued to increase in 1Q 2009 to reach €33.33 per month, boosted by a 25% year-on-year increase in non-voice ARPU to €7.50 per month.

France Telecom needs to sustain this trend. With the Orange 2012  vision in mind, we expect France Telecom to continue to rely on TV and the multimedia experience to build on its billing relationship with all its customers.

UK a far more tricky proposition

Without the prop of TV, broadband and mobile subscribers declined in the UK in Q1 2009, losing 23,000 and 145,000 respectively from the end of 2008. Nonetheless, FT was relatively pleased with 1Q 09 performance on the back of a difficult market condition.  

Furthermore, ARPU continued to hold steady in Q1, where internet ARPU stabilised around £16 per month and blended mobile ARPU around £22.60 per month.  

Orange UK’s strategy relies on maintaining market share and ARPUs with an emphasis on providing value for money to customers. The highly competitive pay TV market in the UK means that the benefits of its much delayed IPTV plans will not materialise soon.  After all, BT’s venture into the pay TV market yielded only 1% of the Pay TV market share at the end of 2008.    

EBITDA margins down

Overall, while France Telecom Group’s results were resilient against the global economic downturn, its group EBITDA margins did decline.  It will be interesting to see how other incumbent telcos such as Telefonica, DT and BT would fare this year. France Telecom has a declining trend, historically, compared with the others.  

We remain optimistic about France Telecom Group’s operational performance, although additional revenue momentum will depend on the operator’s ability to introduce new services and products and monetise its customers’ traffic and behaviour patterns.

See related news: France Telecom turns in strong Q1 performance

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